Business Credit Cards

How do business credit cards work?

A business credit card is different to a personal credit card (the one you’d use to buy the family TV) because it’s tied to your business or company rather than your own finances.

They have business-style perks and keep your finances separate, but they actually offer tons more value for business owners, like:

• Earning rewards points or even cashback on purchases and paying bills
• Managing cashflow during seasonal ups and downs
• Employees can have their own card, keeping transactions in one place
• Keeping your finances separate, and tax time easier

No matter how old or new, or how big or small your company is (it could be just you on the payroll), a business credit card can help squeeze more mileage out of your expenses, and streamline your business.

Business Credit Card or Corporate Credit Card?

Before we delve any deeper into the world of business credit cards, let’s take time out to discuss the difference between a business credit card and a corporate credit card.

Business credit cards are typically designed to be used by small to medium sized business, generally with up to 100 employees. The tools on offer are skewed towards the needs of these smaller businesses, with rewards earned in categories that smaller business owners are more likely to purchase in.

Meanwhile, corporate credit cards are designed to be used by larger companies and corporations with a much higher annual revenue, often with hundreds, or even thousands, of employees. These cards offer integration into corporate accounting software, and often come with a designated customer service representative and other perks more suited to corporate use.

If you're running a large business and need to manage the expenses of many departments, it might be time to consider an expense management card. These accounts offer you a way to handle employee expenses and payment.

Are you eligible for a business credit card?

Just like personal credit cards, business credit cards come with certain eligibility requirements, as set out by the card provider.

For the most part, you will need an ABN to apply. That means, depending on the card, you may be eligible to apply even if you’re a sole trader, a freelancer, an owner of a micro business, or you have a side hustle.

In terms of income requirements, most cards require you to be able to prove some sort of income from your business for you to qualify so they know you can make the repayments. Other cards come with much higher income requirements. American Express, for example, requires an annual business revenue of $75,000 or more to be eligible for its business cards.

To give you an idea of what other factors providers may look at when you apply for a business card, here are the eligibility requirements of American Express beyond the income criteria. Among other things, you'll probably need to:

• Be over 18 years of age,
• Be an Australian citizen or a permanent resident,
• Have a good credit history and no payment defaults,
• Have a valid ABN registered for GST.

Meanwhile, NAB has the following requirements regarding eligibility for its business cards. Applicants must:

• Be a sole trader, a business partnership with no more than two individual partners, a company with five or less directors, or a trustee of an eligible trust. Joint borrowers who are not partnerships, or partnerships where one or more partner is a company are not eligible to apply.
• Be at least 18 years old and hold Australian citizenship or permanent residency.
• Be registered for GST, and have a turnover of at least $75,000 per year.
• Have been in operation for at least 12 months, and have a valid ABN.
• Have a business and residential address in Australia.
• Intend to use the card where the purpose is wholly or predominately for business purposes.
• Have all ATO payments and loan repayments up to date.

Now you know the basics or what to look for and the differences between card types, let's dive into the potential benefits for your business.

What are the top benefits of a business credit card?

Business credit cards are a handy tool for simplifying and streamlining your expenses. Here’s some of the benefits:

• Control your cashflow year-round. Business credit cards help you manage cashflow, by paying for larger purchases or bills over time, which is especially helpful if your business has seasonal ups and downs. Or, you can take advantage of interest free days and pay the balance off each month to keep on top of your expenses and pocket the rewards you’ve earned.
• Separate business and personal finances. Having separate cards makes it easier to keep track of purchases, transportation, supplies, sales and other necessities involved in running a small business. Record keeping for tax purposes will be that much simpler with cards which are individually designated for business purposes. Household and personal budgets are much easier to manage when kept apart from small business enterprises.
• Give your employees their own card. Your employees can be issued with cards (with caps to control their spending of course) to pay for fuel and other expenses. That means no more loose petty cash or those vintage slips of paper we used to call ‘cheques’. All your outgoing transactions are logged in one account.
• Business tools and features. Depending on the card you could be offered a number of handy business tools. You might be able to access easy exporting of data to accounting software like MYOB and Xero, and business budgeting apps. Your card might include complimentary travel insurance, concierge services, airport lounge access and flight upgrades for frequent business travellers. There are also discounts and deals with partnering businesses attached to some cards.
• Earn rewards on business spending. You could earn rewards points on your business expenses paid for on your card, that can turn into free flights and accommodation, merchandise and services. Check the rewards earn rate on the comparison tool to find out how many points per dollar are on offer. Read the full review and the card’s T&Cs, because some conditions do apply to earning rewards, like annual or monthly caps. Check which frequent flyer program the card is connected to as well. You might want to earn Qantas Frequent Flyer points directly, or have some more flexibility with Amex Membership Rewards. Look at each program to see which one suits your business.
• Get a big rewards hit with introductory offers. Many lenders offer bonus rewards points when you sign up, which can go a long way towards flights, merchandise and gift cards – all of which boost your business’s cashflow. You’ll usually need to hit a minimum spend within a certain timeframe to unlock the bonus rewards points. As well as earning points when you spend, you could also get other extras like complimentary travel insurance, airport lounge access, and 24/7 concierge services.

How do you choose the best business credit card for your business?

Before you compare cards, first think about what your business needs and what kind of spending and repayment patterns you have.

Here’s some questions you can ask yourself, and we’ll unpack each one next.

Use your answers as a benchmark for your priorities. Let’s look at the different business credit card factors in more detail:

What fees and interest will you pay on a business credit card?

As well as any cardholder fees and annual fees, you’ll need to check other common credit card charges that might apply. For example, if you make a lot of overseas transactions, you might want to look for a card that charges low or no foreign transaction fees.

Most importantly, think about the purchase rate on the card. That’s the interest charged on any unpaid balance.

If you think you’ll carry a balance month-to-moth, you may prefer a low-rate card to help you save on interest. Or, if you’re planning to clear the balance each month, look for cards that offer interest-free days on purchases.

Remember, a charge card requires that you pay the balance in full each month.

How can you make the most of your business credit card? (and what should you avoid)

First, choose a card that benefits you most and is ‘fit for purpose’. Where will the card be used and will it be accepted in those places? If you choose a card that offers great rewards points, find one that gives you the most bang for every buck you spend.

Next, keep track of spending, especially if your employees have cards. You can put a limit on the amount they can use, but it’s still a good idea to keep an eye on the transactions to stay on budget.

If it’s available, use features like exporting directly to finance managing software to run a tight ship on spending.

What To Look For In A Business Credit Card

It’s safe to say that while the American Express Platinum Business Card certainly has its appeal, it’s not going to suit every business owner. The key to choosing a business credit card – just as it is for choosing a personal credit card – is to find the card that matches your needs, your spending and repayment habits, and your budget.

>Here are some questions to ask as you compare business cards and remember, each card listed here in our comparison guide comes with a full review and listing of its features. This is to help you find the best business credit card for what you need. Make sure you read the fine print before applying so you understand what you’re getting.

How do you plan on using the card?

Useability is an important aspect of a business credit card. It is essentially a business tool, which means it needs to be fit for purpose. In terms of using the card day to day, you would need to consider whether the card can be used to cover the costs of running the business.

As an example, you may want to think about the card’s credit limits and the number of additional cardholders on offer. If you opt for an American Express card, you’d want to consider surcharges for accepting Amex may be higher than that of Visa or Mastercard.

How do I apply for a business credit card?

When you’ve found the card you want, click ‘Go to offer’ to be directed to the provider’s application page. The application process typically takes around ten minutes, and you’ll need to provide proof of your identification, income and other details to complete the application.

You’ll most likely need an ABN to be approved for a business credit card, and some providers might want you to be registered for GST, too.

What if I’m a sole trader or self employed?

If you’re a sole trader, self employed or have a fledgling business, you might find a personal credit card is enough until your business grows. The volume of your transactions, revenue and expenses can help you decide whether you can separate them easily from your personal finances, or whether a business credit card will make life easier.

You’ll need to have an ABN (Australian Business Number) to apply for a business credit card as a self employed person or sole trader, as well as other supporting documents like bank statements to apply.

Who do you want to be liable for the card?

Unlike personal credit cards, which place sole liability on the primary cardholder, business cards may offer a choice of liability structures. Joint liability can allow business owners to share liability, while with business liability, the business is held liable.

How closely do you need to monitor additional cardholder spending?

Most business credit cards offer itemised statements for each additional cardholder, making it easy to track and monitor cardholder spending. However, you may look for additional tools, such as the ability to switch card features on and off for each cardholder, allowing or not allowing the ability to use the card online, to withdraw cash, to spend overseas and more.

What perks do you need?

It’s easy to get swept up in the promise of extras, but not every business needs them. As such, it’s not worth paying for them. Extras should create value, making the card more useful to your business. However, extras – and rewards – come at a cost, so you need to make sure the extras on offer provide more value in dollar terms than you pay out in annual fees.

How much will it cost?

You may find business cards tend to come with higher annual fees than their personal card counterparts. As we mentioned, it’s important to make sure that what you get out is more than you put in, in terms of value. However, you may also find that the costs associated with keeping a business credit card can be tax deductible.

And interest? Business credit cards charge interest on balances carried over. While there are low rate options on the market, it’s best to avoid paying interest whenever possible by clearing your balance at the end of the month. It’s worth noting that not all business cards offer interest free periods on purchases, so this is something to look out for as you compare options.

Can I claim the annual fees on a business credit card as a tax deduction?

Businesses can usually claim the annual fee on a credit card, but always check with your tax accountant first to make sure. There are other benefits to a business credit card at tax time, too.

What business tools do you need?

Again, this is about making sure the card is fit for purpose. If you use a certain accounting software, for example, you’ll want to choose a business card that allows you to automatically export data to that software, while perhaps providing extras such as spend categorisation.

Weighing Up Your Options

Running through the various rewards programs, you can see it’s a similar story with each of the big players. While the details may change, there is typically a ‘store’ for physical goods and gift cards, and a system for booking travel or converting points to other frequent flyer programs. So, what should you do? Redeem now, or wait until travel is in play again? Without question, travel redemptions offer the highest return in terms of value. If you can wait, it would be wise to do so. But, if you really feel the need to redeem your points now – or your points are about to expire and you need to offload them – you could pick up something ‘instore’ that would be beneficial to your business, your employees, or even just you, the long-suffering boss.

Before you hit redeem however, be sure to do your research – and then do the maths. Take time to find a few things your business really needs, then divide each item’s retail value by the number of points you would need to redeem. Take into account hotel stays and car hire if that’s an option in your state or territory, to work out how to get the most back from your points. You earned them, so make sure to use them wisely.

Final word

As with any big financial decision, choosing the right business credit card isn't always about finding the “best”. It's about finding one that works with your business. We've gone through fees, interest, rewards and reporting and hopefully you'll be feeling empowered to choose the right card for you.

A business credit card can be a powerful financial tool that could unlock cashflow and rewards. But only if used in the right way.