Business Credit Card

Business Credit Cards can be a very useful source of additional working capital for small and large businesses alike. A business credit card enables business owners, and nominated personnel to purchase goods and pay for services on credit, up to the credit limit approved by the credit card provider.

Just like personal credit cards, business credit cards provide ready and accessible credit but with a few additional features for easy expenses management such as employee purchasing control and in-depth financial reporting. Most business credit cards come with interest-free periods, while some also offer rewards programs and balance transfer options.

A Guide to Business Credit Cards

Business Credit cards are usually issued in the name of a business and are used to cover work related purchases made for use within the business. To be eligible to apply for a Business Credit card the business will need either an Australian Business Number (ABN), or Australian Company Number (ACN) along with contact details of their Accountant.

Business credit cards operate very much in the same way as a personnel credit card, though they also tend to include an array of features designed specifically for business use, the 5 most common of these are:

  1. Restricted Use - This measure is designed to ensure business credit cards are used only for their intended purchase, so for example business owners can prevent their business credit card from being used to make cash withdrawals or specified types of purchases.
  2. Cards issued to employees - In a similar manner to supplementary cards on personnel credit cards Business Credit Cards offer the ability to add supplementary cards to the account for issuing to employees of the business. With Business Supplementary cards each of the cards issued can be allocated a different credit limit and usage restrictions, relative to the employees requirements to fulfill their role.
  3. Expense Management Reporting - To help business owners and their finance teams manage the expenses incurred on their business credit cards the card providers offer reporting which is synch with the standard reporting formats of the major accounting software tools for easy importation and reconciliation of expenses.
  4. Benefits to help build your business - The card providers appreciate that business customers are very valuable and therefore they invest in developing a range of complimentary benefits designed to help business owners manage and build their business. These complimentary benefits may include insurances, rate discounts and the opportunity to meet with a business banker.
  5. Any debt is the responsibility of the Business - All business credit cards are issued to the company and not to an individual, and so any debts incurred on a business credit card are the responsibility of the Business and not the Individual who may have made, and approved the transactions. It is for this reason that business credit cards all offer the ability to restrict the value and types of purchases made on these cards, as in the end the responsibility for the debt rests with them.


Business Credit Card Comparison - Tips on how to approach this

1. Access the costs to your business of using a Business Credit Card

Two factors heavily influence the cost of a business credit card, the annual fixed fee and the purchase rate. The level of the annual fee is determined by how rich the card is with benefits, so for example if the card offers a reward program its highly likely the fee for this card would be higher (probably at least double) than a card with no reward program. The same cost differential would apply where a card has complimentary business insurance, or not. The purchase rate of business credit cards is the rate of interest you will be charged on any purchases made with the card which are not repaid in full by the due date on your monthly card statement.

How you intend to use the Business credit card should be carefully considered as this will help identify a shortlist of cards that will best suit the businesses spending and budgeting requirements.

Where the business credit card is going to be used to make purchasing easier to manage, more convenient and you are confident that the balance on the card account will be cleared in full each month, business credit cards with low or no annual fees should be high on the potential list even though these cards Purchase rate may be at the higher end of the range, as no interest will be incurred so long as all the balance is cleared each month on time.

If your intention is to use a business credit card as a line of credit, the purchase rate becomes the significant criteria, as it is this that will determine the monthly interest charge on the debt that is carried across on the card each month. Many attractive introductory offers with a focus on low or 0% purchase rates frequently are offered by the major card providers, though be sure to check the terms and conditions of these cards as they have some very tight conditions relating to retaining the low purchase rate.


2. Pay no interest on purchases by using the credit cards Interest-free days

The majority of Business Credit Cards offer interest free days, with the average being up to 45 days. These interest free days are the number of days which purchases incur no interest charges.

The actual number of interest free days each purchase you make with your business credit card will receive is dependent on when, in your statement cycle, you make a purchase. So for example if you make a purchase on day 1 of your statement cycle you will receive the maximum 45 days interest free days on that particular purchase amount.

Common to all business credit cards is that to benefit from these interest fee days each month, your card balance must be settled in full by the stated repayment date.


3. Complimentary Benefits which save $$ and provide peace of mind

With the business holding full liability for all purchases made with a business credit card efforts by the card providers to mitigate fraudulent and unauthorized transaction are highly valued by business owners. The efforts made by the card providers to save on expenses whilst providing peace of mind include

  • Replacement, repair, or reimbursement of items purchased with the business credit card in the event of theft or damage;
  • Extended warranty protection for purchased goods, given on top of the manufacturer’s warranty;
  • Comprehensive travel insurance for trips charged to the card;
  • Fraud monitoring for online purchases and transactions;
  • Protection against employee misuse of their credit card privileges.


4. Does getting rewarded for your Business Spending make sense?

The inclusion of a reward program should probably not be amongst your primary reasons for selecting a business credit card, though they are worth including in your thinking, particularly if you plan on using your business credit card as a primary vehicle for expensing your businesses operational costs through.

Many of the rewards programs offer rewards that may well be directly relevant to your business and so offer “real” value, which can benefit the business. The ultimate real value is the cash back reward where your card is credited with a sum of cash, or there are the multitude of goods and services which can be acquired in return for points, so maybe a new computer or printer for the office?

When accessing the virtues of business credit cards that include reward programs be mindful that these cards do tend to attract higher annual fees, and if you are not 100% confident that the balance of the credit card will not be fully repaid each month refocus your thinking back toward low purchase rate cards.


Applying for a Business Credit Card

Applying for a Business Credit Card follows essentially the same process as that of applying for a Personal Credit Card, whereby the credit card provider requests a range of information on your business which it then uses to asses the your businesses ability to manage debt and repay any debt incurred on a business credit card. 

When you submit your business credit card application, it will be evaluated by credit card providers based on your credit score. To the credit card provider the credit score is one of their most reliable indicators of whether the individual or business can keep up with their payments and be able to pay on time. The credit score, which is central in the assessment of all business credit card applications, is calculated not by credit card provider, but by a specialist credit reporting agency.

There are currently three major credit reporting agencies operating in the Australia - Veda Advantage, Dun and Bradstreet, and the Tasmanian Collection Service. These credit bureaus are the agencies that issue credit scores, and while each agency has its own set of standards to aid them in their computation of business credit scores, some criteria may be common among them. These include:

  • The type and age of the business, and the number of employees
  • Payment history (especially delinquencies) and the number of inquiries into the business
  • Amount of credit utilized versus the available credit
  • Current payment status, and any liens and collections which may be in force

As a general rule when assessing applications for Business Credit Cards credit bureaus also consider the personal credit history of the business owner or the principal. Consequently it is important that when you make any application for a Business Credit Card you ensure that your personnel credit report is in good order with no blemishes.


What Information is required to apply for a Business Credit Card?

For most business credit card providers, the standard requirements are: You must be at least 18 years of age, of good credit rating, and at least a permanent resident of Australia. In addition to providing details and information about your business, you will also need to have registered for an Australian Business Number (ABN). Some providers specify additional eligibility requirements such as a minimum business income and/or a minimum number of years for the applicant to have been in business.

Here's a checklist of information to have to hand before commencing your Business Credit Card Application:

  1. Your Personnel Income details to include salary, wages, pension and any other sources by annual or monthly value.
  2. The applicants details - name and address details (note these personnel details will be used by the credit card provider to access your application in conjunction with the information provided about the business)
  3. Current employment - Company and position in the company
  4. Company Details - Name, Business Type (Sole Trader, Charity, Pty Ltd etc.) ABN and business category 
  5. Company Contact details - mobile number, email address and the address from which the company trades
  6. Financial commitment details - to include details of any mortgages, loans, credit cards and monthly living expenses
  7. Driver's license - as proof of identity
  8. Your accountant's details - so your accounts can be verified
  9. Balance Transfer Details - Details of the credit card and value of any balance transfer. 

Frequently Asked Questions

How does a Charge Card differ to a Credit Card?

A charge card acts as a short-term (usually monthly) loan to a business on any purchases they charge on the card. Charge cards defer the payment owed to the end of the balance month. As a consequence, interest rates do not apply to charge cards as there is no revolving line of credit. Charge cards are different to credit cards as they provide you with no preset spending limit, for financial flexibility and full control of your expenses. The full amount must be repaid each month to avoid hefty late fees, compared to credit cards that allow a balance to be carried across each month, which then attracts interest at the credit cards stated interest rates.

Do Business Credit Cards enable you to earn reward points when making payments to the ATO?

Increasingly the Business Credit Card providers are limiting the points which can be earned from payments to the ATO. American Express Business Credit Cards enable you to earn reward or frequent flyer points from ATO payments though they generally charge a fee for this service. 

We are a start up company, do we qualify to apply for a Business Credit Card?

To apply for a Business Credit Card at a minimum you will need an ABN and evidence of an income level which meets the card providers eligibility level. In conjunction with this it will be helpful if you have been trading for at least 12 months and can show a steady stream of profitable revenue each month. The credit card providers are all keen to support Australian Start ups but remain cautious about extending credit to new businesses, which have inconsistent monthly revenue figures.

Business credit cards glossary of terms

Please note that these are a general explanation of the meaning of terms used in relation to business credit cards. Your bank or financial institution may use different terms, and you should read the terms and conditions of your credit card carefully to understand all fees, charges and interest rates that may apply to your card.

Annual fee or account-keeping fee: An annual or monthly account-keeping fee charged by your lender to cover their costs of administering your business credit card and maintaining the line of credit.

Automatic transfer: A facility that enables you to automatically transfer money from a one bank account into another account on a designated date, to coincide with bills or payments. You can set up your business credit card to automatically transfer funds when bills are presented by named suppliers.

Average daily balance: The balance of your credit account is determined by adding up all balances during the month and then dividing the total sum by the number of days in a given billing cycle. Credit card providers generally calculate the daily balance based on the annual interest rate.

Business Balance transfer: Transferring the outstanding balance on your business credit card to new card usually offering a promotional balance transfer rate which will be applied to any balance transferred for the duration of the balance transfer period.

Balance transfer fee: A fee charged when you make a balance transfer. It may be a flat fee or a percentage of the amount you transfer, which is generally in the range of 1-3%.

Cash advance: Withdrawing cash from a line of credit. This will generally incur additional fees and a higher rate of interest than the cards purchase rate.

Cash advance fee: A fee charged when you make a cash withdrawal from an ATM using your credit card. The bank may charge a flat fee or a percentage of the amount of the cash advance, this can be up to 5% of the withdrawal.

Credit card limit: The maximum amount your business can spend using the business credit card before having to re-pay some of the balance.

Creditor: A lending agency to whom your business owes money.

Debit card: Also commonly referred to as a bank card or a cheque card. These cards allow you to access the money in your savings or checking account electronically to make purchases.

Default: When a business fails to fulfill their obligation to make the minimum necessary payment on their business credit card. Any defaults will negatively affect the credit rating of a business

EFT: Electronic Funds Transfer. The digital transfer of money between accounts via ATMs, home computers, and EFTPOS machines.

EFTPOS: Electronic Funds Transfer at Point Of Sale.

Full balance: The total amount owing on your business credit card that month, including any purchases made that month, any amounts unpaid from previous month’s bills, and any interest or fees charged.

Interchange fee: Fees paid between your bank and a merchant’s bank to accept card-based transactions.

Interest rate: The rate at which your outstanding balance increases per month if your bill is not paid, or not paid in full.

Interest-free days: The number of days your business has to pay a bill in full before interest is charged on the balance. It is the period of time between the date of a purchase and when the payment is due.

Introductory rate: An interest rate charged when you first sign up for a business credit card, offered to entice new cardholders. These rates are usually very low, but revert to the standard rates after the introductory period.

Merchant: A business that sells goods or services to customers for payment.

Minimum payment: The value listed on your bill as the minimum your bank requires your business to pay its business credit card for that month.

Ombudsman: If you have a dispute with your business banking institution and haven’t been able to resolve it through the institution’s internal complaints resolution process, you can contact the Financial Ombudsman Service of Australia or the Credit and Investments Ombudsman. These are free and independent services that help people resolve disputes with their financial institutions.

Overdraft: An overdraft occurs when you write a check, make an ATM transaction, use your debit card to make a purchase, or make an automatic bill payment or other electronic payment for an amount greater than the balance in your savings/debit/checking account. The bank extends credit up to a maximum amount (the overdraft limit) and you can make withdrawals up to that limit. Interest is charged on the fluctuating daily balance.

Overdraft or overlimit fee: A penalty fee charged to you for exceeding your credit limit.

Penalty fees: Fees charged if you break the terms of your cardholder agreement or other requirements related to your account. Penalty fees include late fees and overdraft fees.

Pre-approval: An initial approval notification that provides a business with an estimate of the credit limit they would be approved for if they applied for a line of credit.

RBA cash rate: The overnight interest rate that the Reserve Bank of Australia offers financial institutions to settle-up on inter-bank transactions. This cash rate influences the interest rate that banks give each other.

Revolving account: An account in which there are not a scheduled number of payments and the full balance doesn’t have to be paid off monthly. Credit cards are the most common type of revolving account. They can be contrasted with business loans, which must be paid off in a certain timeframe.

Rewards program: Benefits that come with the use of a business credit card, where the business earn rewards points for each $1 of eligible spend made on the card. These rewards points can be redeemed for a variety of products and services, depending on the rewards program, including frequent flyer points, cash back and shopping vouchers.

What will I need to apply for a Business Credit Card?

As with most credit cards, you need to be over 18 years of age, be resident or citizen of Australia, have a good credit history and earn above a certain annual income threshold, which varies between different business credit cards. You also need to provide evidence of your financial records and ABN number.

How much can I balance transfer to a business credit card

Credit card companies generally allow between 80-95% of the approved credit limit for balance transfers. The specific amount will depend on your application, credit history and the bank's lending criteria for their Business Credit Cards.

How many additional cardholders do Business Credit Card Accounts support?

Business credit cards can generally support up to 99 additional cardholders. To find out how many cardholders your business credit card allows, refer to our individual reviews of the cards.