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Business Credit Card: Tips for Choosing the Best One for Your Needs

Man at computer comparing business credit card options

Business credit cards can be confusing. To reduce the stress of choosing the right one, here’s a rundown of all the different considerations to think about when finding the best business credit card for your needs.

What is a business credit card?

To begin with, it’s important to note the difference between a business credit card and a charge card. With a business credit card, you can carry a balance each month up to the limit. A business charge card, on the other hand, does not have a credit limit but requires that the balance in full is paid off each month. Here, we focus on business credit cards which can carry a monthly balance and can include a range of features such as rewards, frequent flyer points and travel insurance.

Although having many of the same features as personal credit cards, business credit cards are specifically issued to businesses that have an ABN, whether a sole trader, company or partnership. Another feature that differs from personal credit cards is that cards can be provided to employees, making it possible for them to buy goods and services with the company credit cards. Cards for each employee can be set up with a limit depending on individual spending requirements. For example, a company might have six employees needing a limit of $5,000 each, with a combined total limit of $30,000.

Who is liable for the debt will depend on the structure of the business. A sole trader running a small business will be personally liable for the debt accrued on the credit card, or on supplementary cards issued to staff. If the business is incorporated, the company is liable for the debt. In the case of partnerships, joint and several liability apply. This means that the business partners are both responsible for the debt, but each individual partner could also be responsible for the entire debt.

Business credit cards have features tailored to specific business requirements. For example, business credit cards offer accounting tools, including showing itemised transactions on a monthly statement for each card. Many business credit cards offer access through online banking that shows transactions soon after they are made. For accounts with multiple cards, the amount spent on each card will be detailed in a monthly report, showing each expense amount and category. This facilitates accounting and the ability to ensure that cards are being used for appropriate business purposes, which should be outlined in advance with staff.

Business credit card companies and features

In Australia, business credit cards are offered by Visa, Mastercard, American Express and Diners Club. Types of business credit cards include low-rate cards, frequent flyer cards and rewards cards. Each of these will appeal to different businesses.

  • Low-rate cards – are appealing to businesses that want a low interest rate and a low annual fee. These no-frills cards don’t provide the features found with frequent flyer and rewards cards.
  • Low-fee cards – good for people who want low ongoing fees with some premium features
  • Premium cards – offer many benefits beyond standards cards and appeal to people who see rewards as an added benefit, not a necessity
  • Frequent flyer cards – these appeal to companies that book a lot of business travel. For example, Qantas Frequent Flyer card.
  • Rewards cards – are good for businesses that want to receive rewards points for what they spend on their credit card.

Business credit cards are available from a range of lenders. Major bank business credit cards are available from ANZ, NAB, the Westpac, and the Commbank. Smaller banks and other lenders, such as credit unions, also offer this form of business finance.

Things to think about when choosing

  1. How will you be using the business credit card? If you travel a lot or want to receive rewards from your transactions, you will want to choose a frequent flyer or rewards card. If you plan to pay off the balance each month, a higher interest rate card might be okay. If you think you will carry a balance on the card, you will want to look for a lower interest rate. For example, interest rates on full feature cards tend to range from 18% to 20% while low-rate cards can be found for between 12% and 14%.
  2. Getting multiple business credit cards: If you plan to get several cards for staff, you will want to be sure the card offers expense reporting tools that break down business expenses by each staff member and expense category. With some cards, you can easily export data to your accounting program, spreadsheet and BAS. Also, with many business credit cards, you can easily set the dollar limit for each employee through online banking.  
  3. The interest-free period: Most cards offer an interest-free period if payments are made within a certain number of days – usually 55 interest-free days.
  4. What credit limit will you need? Different cards offered will have varying credit limits. Your credit limit will also be determined by other factors including your personal or business credit score, your annual income and financial records. If you have a good credit history and score, you will be more likely to qualify for a lower interest rate and higher credit limit.
  5. The annual fee: Depending on the type of business card and features, the annual fee can range from $0 to $200 per card. Many credit card providers provide an introductory offer with no card fees for the first year.
  6. Special bonuses: In addition to rewards and frequent flyer cards, some credit cards offer free benefits such as travel insurance and purchase security insurance. Cards offering these benefits will have higher fees.
  7. Introductory offers: Some banks provide introductory offers for business credit cards such as no annual fee for the first year or a lower introductory interest rate – for example, 6% for the first year changing to the standard rate of 20% when the period ends. Also, there are balance transfer offers, such as no interest for 12 months. Before choosing a card with an introductory offer, read the fine print to understand the terms, fees and charges, and what will happen at the end of the promotional period.
  8. Security: Check security features. You will want a card that offers fraud protection, meaning you won’t have to pay if your card number has been used to make unauthorised purchases. Credit card providers will also watch for unusual transactions and call you if something doesn’t seem right. Depending on the business credit card, you will want to notify the bank if you plan to travel overseas and use your card. An unusual overseas transaction could raise a red flag and the card could be temporarily locked if the bank isn’t aware of your travel plans.
  9. Applying for a business credit card: As mentioned above, several factors are considered when applying. These might include your credit score (credit rating), annual income and financial details (what you owe and own), and your ABN.

Considering the points above will help you choose the best business credit card for your needs.

A helpful resource for comparing credit cards is the Canstar Credit Card Star Ratings.  The ratings are updated each year and identify the best cards in several categories, including low rates, low fees, premium, rewards and frequent flyer. If you are looking for business finance, get more information in The Complete Guide to Business Loans in Australia

What to avoid when using a business credit card

Although they can be convenient and simple to use, there are drawbacks for  small business owners. Constantly carrying a balance and using the card as a long-term finance solution, isn’t a good option.

In addition, if you use the card for a cash advance, you will pay an even higher interest rate. Low rate business credit cards can be used for short-term finance needs, but it’s not generally recommended. In the end, how you use business credit will depend on your objectives and financial situation. It’s best to seek advice from a business finance professional, such as your accountant.

Moula has assisted many Australian small businesses with their business finance needs. Learn more about small business loans from Moula.  If you want to get an estimate of principal and interest loan repayments, check out our business loan calculator.


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