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.