Business credit cards

What are business credit cards?

Business credit cards allow you to free up cash flow by using a line of credit to buy what you need for your business. These cards usually come with other perks including rewards programs, multiple cardholders and expense-reporting systems.

Unlike a personal card, the company can be held liable for the debt on a business credit card instead of the individual.

How do business credit cards work?

Similar to personal credit cards, business credit cards give you access to money up to the credit limit, and allow you to pay off your expenses over time (usually with interest charges). But business credit cards also offer features to help manage work-related spending and financial tasks, including additional cards for employees, expense-tracking tools and even virtual expense management cards in some cases.

Some business credit cards include perks such as rewards, complimentary insurance or airport lounge passes. They also usually charge an annual fee, either for the whole account or for each cardholder linked to the account.

Business charge cards

Business charge cards are similar to credit cards in that they give you access to credit for a set time before you need to repay what you've spent. Some charge cards also offer no pre-set spending limit, which can give you more cash flow compared to a credit card with a fixed credit limit.

But with a charge card, you need to pay the full balance by the due date on each statement. The billing cycle is typically between 25 and 51 days and, while there are no interest rates, you could pay a hefty fee if you miss the payment due date.

Personal vs business credit card liability: Who is responsible?

As business credit cards are designed to help you manage business expenses, you can choose between an account where you are personally responsible for it (known as personal liability) or one where your business is responsible (business liability).

This can be an important distinction if you're in business with other people, or if you want to protect your personal finances against any potential issues down the track.

Corporate credit cards

Corporate cards are designed for medium to large businesses. You could expect to find the following features with a corporate card:

• Unlimited cards for employees
• Control features for each card (as well as the entire account)
• A dedicated business account manager or service team
• Integration with business finance software
• Unauthorised transaction insurance
• Corporate travel and rewards programs

These features are often similar to those offered on other business credit cards but at a larger scale when you compare them to cards designed for SMEs (small to medium enterprises).

Corporate cards also have different eligibility requirements, such as a minimum number of years in trading or a minimum annual turnover. Before applying and opening a corporate credit card account, you'll usually need to submit an enquiry and talk to the provider's business team.

Pros and cons of business credit cards

Is fuel a major work expense? Find out about fuel cards

How to compare business credit cards

Some of the key factors to compare when weighing up business credit cards include the following:

Fees and charges

Some of the most common business credit card costs include the following:

• Annual fees. Business credit card annual fees typically range from $40 to $1,750. There are also a few business credit cards that offer no annual fee, a waived annual fee when you meet requirements or customised annual fees for your business. Corporate credit cards will sometimes have a one-off establishment fee.
• Additional cardholder fees. These fees are charged annually and can be between $10 to $150 per card. There are also business cards that offer additional cards at no extra cost – a key feature to check if you want to use the card for employee expenses or department budgeting.
• Interest rates. Business credit card interest rates typically range from 9.99% p.a. to 22% p.a., so you'll want to try to avoid carrying a balance as much as possible.
• Currency conversion fees. When you make international payments in foreign currencies (including online), you'll be charged a fee around 3% to 3.5% of the transaction value.
• Minimum monthly repayments. Business credit cards generally have minimum payments of 2% to 3% of the outstanding balance. But if you get a charge card, you will need to pay the account balance in full by the due date on each statement.

Other features and extras

• Business rewards. Business credit cards are more likely to let you earn points per $1 for payments to the Australian Taxation Office (ATO) and other government bodies. Some cards also offer complimentary membership to Qantas Business Rewards, with extra perks including triple points per $1 on eligible Qantas flights. Others give you a way to redeem points for cashback, gift cards and other rewards you could use for yourself, employees or clients.
• Complimentary insurance. Many business credit cards include complimentary travel insurance and liability insurance for the account.
• Online business banking. Business credit cards offer secure, 24/7 access to your account. Some also offer real-time data and administrative features, such as requesting new cards or changing limits on additional cards.
• Expense management systems and tools. Keeping on top of business expenses and consolidating your credit card transactions can be difficult among the other million tasks involved in running a business. The following key business credit card features may be able to help:

• • 24/7 monitoring, budget tracking by creating standard or custom reports, clear visibility of company spending and recognising patterns to better manage cycles in spending.
  • Multiple reporting formats, including MYOB, Microsoft Excel, Word, PDF, HTML, XML, CSV and Tab-delimited.
  • Pay anyone features or platforms like American Express AccessLine, which you can use to pay merchants around the world even if they don't accept cards.

How to apply for a business credit card

If you're applying for a business credit card with personal liability, you'll usually be able to apply online. For cards with business liability or custom features, you usually need to call the credit card provider's business team or request information on the application.

Either way, you'll need to meet a set of eligibility requirements and have some key documents on hand. These vary between cards, but some of the most common requirements and details include the following:

Eligibility

• ABN. You must have a valid ABN (Australian Business Number) to apply. You must also usually be registered for GST.
• Minimum annual turnover. Most business credit and charge cards have a minimum annual turnover requirement.
• Residential status. You'll usually need to be a citizen or permanent resident of Australia to apply. Make sure to confirm the card's specific residential status requirements before you apply.

Documents and information

• Financial information. You'll need to provide information about your income and/or revenue as well as any assets and liabilities, including investments, debts and regular expenses. This usually includes your last 1-2 tax returns or business profit and loss statements, along with other financial documentation.
• Additional cardholders. If you wish to manage your employees' spending under the one account, you'll also need to provide the details of any supplementary cardholders.
• Accountant's information. If you're self-employed, you may be required to include your accountant’s contact information.
• Other documents. Supporting documentation such as personal tax statements, pay slips and BAS reports may also be required.

Once you have submitted your application, you should get a response within a few minutes if you've applied online or a few days if you've applied over the phone or at a branch.

Frequently asked questions

• Is business credit card interest tax deductible?

  In general, you can claim a tax deduction for most operating expenses – including banking fees and charges – in the financial year that these fees are charged. This means you could be able to claim your business credit card's annual fee as well as any interest that's charged if you carry a balance. Talk to your accountant for specific details on what charges you'll be eligible to claim. Alternatively, you could call the Australian Taxation Office (ATO) business line on 13 72 26.

• How many additional cardholders can I get?

  Some business credit cards support 2-5 additional cardholders, while others support up to 99 additional cardholders (or more).

• Are business credit cards eligible for instant approval?

  Most business credit cards will not be eligible for instant approval as there is typically an increased risk for business lending and your application will need to be assessed once you submit it.

• Do business credit cards check personal credit reports?

  If you apply for a business credit card with personal liability, the card issuer will check your credit history as part of the application process. This means the application will be added to your credit file. If you're approved for the card, account details will also be listed on your personal credit file.

• Are the rewards for business credit cards the same as for personal credit cards?

  There will be some differences from card to card and program to program, but mostly the rewards available for redemption will be the same. One perk of business credit cards is that they typically earn more points per dollar spent than personal cards.

• Are there tax implications for earning frequent flyer points with a business credit card?

  According to the Australian Taxation Office (ATO), receiving points is not subject to tax but receiving rewards may have tax implications. You can refer to the ATO website for further information on when tax may apply to rewards you redeem through a loyalty program.

• Are there any business credit cards for bad credit?

  If you have black marks on your credit history (such as defaults) or if you have no credit history, it could make it harder to get approved for a business credit card. When that's the case, here are some options you could consider:

  • Talk to your current bank. If you already manage your business finances with a specific bank, call them and ask about your options in terms of credit cards, loans or overdraft accounts. With existing details of your business, the bank may be able to offer you a solution.
  • Consider a personal credit card. While you may not currently be able to get approved for a business credit card, you could look at getting a personal card and using it for business-related expenses. It usually helps to keep it separate from personal expenses for accounting and tax reporting purposes.
  • Look at business loans and line of credit options. A business loan or line of credit typically offers set repayment terms to help reduce the risk to lenders. You can also get a secured business loan that is guaranteed by an asset or assets that you already have. So in some cases, these options may increase your chances of getting approved.