Business Credit Card overview
What Is A Business Credit Card?
Business credit cards are just like personal credit cards but are used for business expenses. They allow business owners to separate out business and personal finances by putting the card in the business name, rather than your own.
Pros & Cons Of A Business Credit Card
✓ Easy Qualification ✓ Rewards ✓ Convenient ✓ Safer Option
X Personal Credit Issues X More Expensive X Additional Fees X Fraud & Security
Benefits Of A Business Credit Card
Business credit cards can be a convenient way to easily settle small purchases and day-to-day expenses for your business. Business credit cards are also a great way to manage employee expenses as your team grows and have the added bonus of providing a clean way to seperate business expenses from personal expenses.
Business credit cards usually have interest free days which means if you know your terms (and your ability to pay everything back in time) this is a great option for you to draw down whatever you feel is necessary without paying interest.
Many business credit cards also come with a rewards program. Don’t underestimate the value of these points, which, depending on how you spend them can create an equivalent indirect ‘discount’ on all of your business spending.
✓ Credit Cards Are Easy To Qualify For Credit cards are much easier for business owners to acquire than traditional business loans. The application process is simpler, and the requirements are less stringent. If you have a reasonable credit history and are running an established business, you will likely qualify.
✓ You May Get Extra Rewards & Incentives Most credit card companies now offer additional rewards and incentives. These include airline miles, shopping discounts, cash back incentives, and even travel insurance. Each card is different so you will want to weigh up their rewards when deciding.
✓ Credit Cards Offer Many Conveniences Credit cards give business owners quick and simple access to funds that they can use for any purpose. It is far easier than a cheque book, safer than cash, and easier to acquire than a traditional business loan.
✓ Safer Financing Option Unlike cash, if you lose your wallet, you can very easily cancel your card and keep your funds safe. If your account is subject to a fraudulent transaction most companies have security processes in place to reverse transactions and you can request a chargeback if you have a dispute with a merchant.
Drawbacks Of A Business Credit Card
There are a huge number of options from a number of different institutions when it comes to business credit cards. When picking a business credit card it is vital to choose a card that helps you run your business more efficiently and doesn’t add any unnecessary admin or cost burdens.
Business credit cards with rewards programs or long interest-free periods normally attract higher annual fees. You will need to be sure that the additional features that any card you choose has justify the higher annual fee you’ll pay for the card.
Credit cards providers can also charge fees for late payments, dishonoured payments or exceeding the credit limit on the card. Be careful to know the terms of the card, and regularly pay off the balance to avoid these fees piling up unnecessarily.
X Can Impact Your Personal Credit Most credit cards require a personal guarantee. This means that if the credit card is misused, over-extended, or late payments are made, it will negatively impact your personal credit score.
X They Have Higher Interest Rates Business credit cards typically charge a higher interest rate than a small business loan or line of credit. Allowing the interest to accrue also contributes to the high cost of credit card interest, so if you are unable to make repayments each month, it will quickly become a large expense.
X Other Fees Can Add To The Cost Depending on the credit card company you choose, there may be fees associated with the card. These can include annual fees, surcharges, fees for exceeding your credit card limit, or for overseas transactions. It’s important to understand all associated costs and benefits when weighing up your options.
X Credit Card Fraud & Security Company credit cards often need to be used by more than just the business owner. This opens the card up to security issues. If an employee misuses the company card it can have a negative impact on both the business and your personal credit.
Applying For A Business Credit Card
When applying for a business credit card you may need to provide some of the usual loan documentation including bank and financial statements which the provider will use to assess the credit health of your business. They may also ask you for a director’s guarantee and details on any other outstanding personal debts before you are issued the card.
Some of the common credit card eligibility criteria include:
- Your business must have been trading for a minimum of 12 months
- You must have a current Australian bank account
- You must not have any non-payments on your credit file
In order to complete your application, simply use our free loan wizard and compare your options, or simply give us a call on 1300 780 568 and one of our business loan specialists will run through your options.
What Is The Best Way To Use A Business Credit Card?
Business credit cards are a great tool for managing day-to-day or recurring expenses for your business. Given business credit cards have relatively lower limits, they are not suited to larger equipment purchases or to fund large growth projects for your business.
Business Credit Card Fees
Different companies and cards have different fees. Some of the most common fees you may incur include:
- Annual or monthly account-keeping fees
- Cash advance fees for purchasing foreign currency
- International transaction fees
- Fees for using an ATM from a different bank
- Late fees for not paying the minimum amount due
- Monthly statement fees
Which company and card you choose will depend on how you expect to use your business credit card so you maximise the rewards while minimising your fees.
Compare Business Credit Cards
Don’t pay more than you have too. Before you commit to a specific business credit card, there are a few features that you will want to research and weigh up.
- The interest rate
- Fees that apply to the business credit card
- Terms and conditions of the card
- Rewards and incentives on offer
- Security that the card company provides
Alternatively, you can use our free loan wizard to compare your options, or give us a call on 1300 780 568.