Business Credit Cards

Business credit cards can be incredibly effective and rewarding. Be sure to get the right card though...

Business credit cards make life easier for small businesses and enterprise class accounting departments alike. There's no faster way to rack up valuable rewards than having a fleet of employees spending on the road. Business concierge services, travel insurance and fraud protection add an extra layer of security and convenience for your employees while customized reports and statements help keep bookkeeping efficient and compliant.

Business Credit Card Comparison

What is a business credit card?

If you understand the concept of a personal credit card, then you're a good way to understanding what a business credit card is all about. Business credit cards work on the same principle as personal credit cards, allowing the cardholder to purchase goods or services physically at a merchant location, or remotely over the telephone or via the Internet.

However, there are crucial differences between a business credit card and one you would use for your personal purchasing needs, and for an ongoing business it would be inappropriate to use a personal credit card to fund things. Having said that, there are many well-known and super-successful firms that were originally financed by the credit available on the entrepreneur's personal piece of plastic.

Once a company is established, though, there are great benefits in switching to a business credit card, for which you will need an Australian Business Number. You can apply for one of these online from the appropriate government website.

How a business credit card differs from a personal credit card

These are the main differences you can expect to find between a business credit card and a personal credit card:

• Business credit cards are issued to the company not to an individual. In this way, the company named on the card is responsible for any debts that accrue on it, rather than the individual who has it in their possession and uses it for business purchases.
  
• These cards may have restrictions on them, aside from any credit limit that may apply to the card. This may mean that they can only be used for certain purchases, or perhaps that cash withdrawals from ATMs are not allowed.
  
• A number of cards can be issued on the account, and the credit limits and restrictions on each one can be geared to the individual employee who has use of it, so that junior employees will not have the spending power of more senior staff.
  
• The cards come with management reporting features such as monthly itemised purchase listings that allow easier tracking of expenditure for budgetary and tax purposes
  
• Business credit cards may also offer complimentary features such as general and business-specific insurances, and banking discounts

Managing business credit cards:

When running a business one of the most important things to do is to keep track of your purchases. One way of doing this is to always stick with one card. This will help you keep a very good record of all expenses that are business related. Good bookkeeping is key to any successful business. Another benefit of owning one business credit card is that you will have a monthly itemized list of expenses that will help you with the management of your business bookkeeping. This is one of the easiest ways to keep track of your business expenses.

When you are applying for a business credit card, it is important to stick with a bank or financial institution that you already have an existing relationship with. This will help prevent an application being denied and can also increase your credit spending limit. These limits can be very important, especially if you are in business and make large purchases on a regular basis.

When you are using any credit card, including business credit cards, it is important to keep up with your payments. When a payment is not made on time, of the minimum required amount or more, a penalty or late fee is applied to your account. Having to pay this extra fee on top of interest can not only make you pay more, but can also decrease your credit reliability and increase your interest rates.

Any small business owner with business credit cards knows it is important keep your card at the top of the list of priorities with a business. If you happen to fall behind on your business credit card, you will not only get the limit lowered on your line of credit but so will your business.

What is there to choose between them?

As this might be the main means by which a company makes its purchases, the key factor will most likely be the acceptance of the business credit card. In other words, a card that is rejected because the merchant does not accept it is going to be a problem. This is no different to the situation with personal credit cards, where a card carrying the Visa or MasterCard logo is more widely accepted than one with the American Express marque on it. Of course, Amex business cards can have their own perks, such as better rewards programs, extra features and greater kudos. For this reason, many business owners may opt to carry an Amex and one of the others to cover all the bases.

Aside from this, the obvious feature to check is the interest rate, or APR. This is especially relevant if you are going to be spending a lot on your card and will not be paying it off in full each month. Remember also to check the annual fees and transaction fees involved, plus any penalty charges and in what circumstances they are applied. It is important that you check the terms and conditions of any credit card you carry, but where a business credit card is concerned, it simply must be done. Check also to see how easy it is to access your account online, the kind of fraud protection measures that apply, and if there is a zero liability guarantee against fraudulent use of the account. Find out also what sort of insurances are included with the card, and how does the customer support stand up to scrutiny?

Finding the best business credit card

It's almost certain that whichever bank you do your business banking with, it will be able to offer you a business credit card. This may be the same bank you have banked with as a personal customer for many years, and as your business has developed it just seemed natural to open your business account in the same place. Whilst this may seem the easiest option, it may not always be the best for your business. Even if you don't choose to take your business elsewhere, there is certainly no harm in checking out what else is available on the market. This is simply done by checking a reputable credit card comparison website. Armed with the facts, you can always go to your own bank and haggle with them over what they are prepared to offer on their card, compared to what you know is being offered on the other cards. Most banks are happy to talk terms and conditions if it means they retain your business.

Within the various offerings you may discover, there will be two main types of business credit card:

Credit card

This is what you would probably expect a business credit card to be, and it operates as your average personal credit card does. You build up a balance over the month and your statement then requires that you pay off a minimum amount at the end of the month. Whatever you don't pay off is charged at a predetermined rate of interest. This is the better option for businesses that need flexibility due to ebbs and flows in cash reserves, where it may not be financially possible to clear the balance in full each month.

Charge card

Essentially, these provide a short-term (monthly) loan to a business on any purchases they load on the card, as they require the full amount to be completely paid off each month to avoid the imposition of hefty fees. These business credit cards are better suited to companies that are financially stable enough to always be able to clear their balance. American Express and Diners Club are the best-known of the charge cards.

Advantages of a business credit card

• The main benefit of a business credit card also applies to carrying a personal credit card: namely, that you have a ready source of funding that does not rely on you carrying around large amounts of cash, which is impractical and potentially a security risk.
• They also provide the opportunity to make instant approved purchases in person, online or over the telephone.
  

• Issuing credit cards is also usually cheaper than writing a cheque, which in this day and age looks positively antiquated and does not provide the instant assurance that the payment has been approved.
• Business credit cards allow for a separation of personal and business expenses, which makes things far easier for tax purposes and to keep track of business expenditure.
• Selected employees can be issued with their own card on the account, empowering them to make necessary business purchases, and to charge other business expenses to the card.
  
• Employee cards can have separate credit limits and controls placed on them, in accordance with the position of the individual within the company.
• Business credit cards also serve the hugely important purpose of building up your business credit rating.
  

Corporate vs. Business card cards

These two types of card are not the same, and it's is important to know how they differ so you can decide which one will best suit your venture.

Corporate credit cards

Corporate credit cards are designed for larger firms and corporations, and the features of these cards can be tailored to meet the needs of the specific business. This will involve the business owner and executive staff having a face-to-face meeting with a representative of the card provider to hammer out the details. For this reason, the business credit card you will see advertised by your bank or on a comparison site will not be a corporate credit card. To find out about this service will require that you make a personal enquiry at the bank or card company of your choice.

Small Business Credit Cards

This is the business credit card you will see advertised, and this is the popular choice with the small to medium sized business, or for the sole proprietor or business person working from home. Applications for a card of this sort are done in the same way as you would apply for a personal credit card. The easiest and fastest way to do this is with an online application. It goes without saying that a good credit rating will be needed for an approval.

Using a business credit card wisely

As with any credit card, a business credit card is only as good as the use it's put to. Here are a few tips to bear in mind:

Limit how many cards you have - The more cards you have in circulation amongst your staff, the higher the risk of debt building up. Keep the number of cards as low as you can to guard against this.

Use your interest-free period - This is the period in which you are not charged interest from the time the purchase is made until the day the balance is due. If you take advantage of this and then pay your bill off in full, you will have effectively enjoyed an interest-free short-term loan, which is something you can do every month with careful planning.

Don't use your business credit card as a debit card - This means that you should not use your card to withdraw cash from ATMs, or for any other transaction that is deemed a cash advance. Cash advance transactions do not enjoy an interest-free period and are charged interest from the moment they happen, and the applicable interest rate is usually higher than the purchase rate.

Pay on time - The best bet is to pay in full on time to avoid any interest charges. Failing that, at least the minimum payment must be met, and it must reach the card company before the due date or a penalty will be charged.