Things to consider before applying for a business credit card

These days it is considered a must to compare everything from insurance prices to utility providers, and a savvy consumer can save money on practically anything if they shop around. This is particularly true when it comes to credit cards.

Over the past few years there has been a lot of emphasis placed upon comparing credit card providers in an effort to get the best deal. You could save money on interest rates, fees and charges if you do manage to find a card with a better offer. This is especially important when searching for a credit card for your small business. However, before you do make the switch or consider applying for a business credit card, there are a few things that you need to keep in mind:

  • What is a business credit card?
  • What are the features of business credit cards?
  • Why would I consider a business credit card over a personal credit card?
  • How to compare business credit cards
  • Managing your business credit card

What is a business credit card?
Business credit cards work similarly to personal credit cards. They allow you to purchase goods/services on credit, within your assigned credit limit that is approved by the issuing bank at the time of application.

There are three mains types of cards in the market, it's important to understand the difference between each of them:

Credit Cards: A card with a revolving credit that does not need to be paid in full, but incurs interest charges on the balance left unpaid. Read the MoneySmart guide for more information on how credit cards work.

Charge Cards: A card to use with an account that must be paid when a statement is due otherwise significant late fees will be charged.

Debit Cards: function similarly to credit cards; however they only let you spend the money you actually have as they are linked back to a bank account to draw funds for purchases you make.

What are the features of business credit cards?
It is important to note the difference between small business credit cards and personal credit cards:
Business credit cards have different application criteria to personal credit cards.

Generally, a business credit card has different application criteria to a personal credit card. When you apply for a business credit card, you will generally need to provide your ABN Number, two completed quarterly BAS statements, your accountant details and merchant details (if applicable).

  • Many business cards in Australia are actually charge cards, not credit cards. It is important to be clear on the difference between the two types of cards before making a decision to apply. It will come down to your spending behaviour as to which one suits you best.
  • Business credit cards have additional reporting benefits: A dedicated business credit card will have the benefit of separation of business expenses from personal expenses. Some cards also include detailed itemisation of GST and the ability to download and import your transactions in to popular accounting software suites like Quicken and MYOB, or in CSV format that is readable in Microsoft Excel. This feature will save you a lot of time when it comes to preparing your expenses for lodgement of quarterly BAS statements.
  • If you use your business credit card solely for business purposes, the annual fee is tax deductable. There may be some implications to this, and it's important to check with your accountant to confirm.
  • Some offer rewards on your business purchases. Business cards often have an attached rewards program which will allow you to earn rewards points on your business purchases. These points can then be redeemed for travel and accommodation, merchandise and other items available through the rewards program.
  • In many cases you are allowed a greater number of additional cardholders.Some business credit cards allow up to 99 cardholders, as opposed to personal credit cards which are usually limited to 1-3 cardholders.

Why would I consider a business credit card over a personal credit card?

The main reason to consider a business credit card is to keep your personal  and business expenses separate.  Also, your credit application will generally be made through your entity as opposed to you as an individual, meaning your card will be issued to your company. There are some benefits to this if you operate as a company, as it means you could have increased protection as your debts are the responsibility of the company, not you as an individual. Read the ASIC guide to business structure for more information.

How to compare business credit cards

Here are some of the factors to consider when looking at the various offers available in the market:

  • Interest Free Periods: Learn how interest is calculated for the credit card you're considering, and look for cards that have longer interest free periods. This will give you more time to repay your balance and help with cash flow.
  • Rewards points: If you are sensible with your spending and know you are going to repay your balance on time and in full, you can benefit from some of the rewards programs available for business credit cards. Consider the types of rewards you will be most likely to use, and most importantly, calculate how much you would have to spend for the net value of the rewards to exceed the value of the annual fee. If it's an unrealistic spend level, the rewards program probably isn't for you. Read the guide to credit cards with rewards programs for more information on how they work.
  • Assess the credit limits each card is willing to extend: It's also important that banks aren't automatically going to assign you the highest available credit limit - you will need to meet the criteria provided, and your credit limit will be based on your credit situation. As there is often no distinction between a small business owner and the business itself, understanding personal credit history is vital. To access your personal credit report, click here >>
  • Read the terms and conditions and product disclosure statement for each offer: It is absolutely critical you understand the terms and conditions before making a decision to apply. Pay careful attention to how and when interest rates and fees are charged.

You can read the business credit card comparison guide on for more details.

Managing your business credit card

Here are some tips to help you ensure you manage your business credit card wisely:

  • Limit the amount of additional cardholders to only the amount you need. It will be easier for you to keep track of expenses with less people to manage and monitor.
  • Use your interest free period to your advantage. Making the most the interest free period on a credit card can provide cash flow benefits for your business, however it's really important you keep track of your expenses and pay all your bills in full and on time.
  • Don't use your business credit card for cash withdrawals. Cash withdrawals attract a higher interest rate, the cash advance rate, which in most cases will be higher than your standard variable purchase rate

The best tip is to always pay your card in full and on-time. Spending beyond your means is the worst possible thing you can do. You want to do everything you can to avoid being charged interest on your purchases.

On the flip side, it can be just as important for a small business to understand who they are extending credit to and many SMEs are unaware they are able to access the credit history of potential clients and customers. Dun & Bradstreet's Express service offers access to the company credit history database without the need for long-term contracts, perfect for small business purposes.

If you are considering a business credit card, be sure to speak to your accountant to gain financial advice specific to your situation before applying.


Timothy Ng writes for the Australian credit card comparison website You can subscribe to the Credit Card Finder newsletter to stay up to date with the latest credit card news and offers.

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