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As the name suggests, a business credit card is designed specifically for work or business spending, rather than for personal use. These cards are issued to businesses with an ABN, not individuals. Business credit cards can be used by businesses of all types and sizes, and most have at least one credit card.

What is a business credit card?

Often, businesses start off using a personal credit card, but as their business grows, find a business credit card is more suitable. These cards can be used to pay for a business’s regular expenses or used to cover costs when cash flow is slow in lieu of getting a short-term business loan.

Business credit cards offer a variety of advantages for businesses, including the ability to keep business transactions separate from personal transactions, making accounting much easier. The responsibility for the business card can either be personal, with the primary cardholder liable for managing the card and debt, or the business entity can be responsible, depending on the credit card terms and conditions.

Business credit card vs Business line of credit

A business credit card may sound the same as a business line of credit. There are, however, a number of differences between the two:

Business credit cardBusiness line of credit
An unsecured loan based on your personal credit historyCan be secured or unsecured (collateral required for secured line of credit)
As it works almost exactly like a personal credit card does, use the card to pay for business-related purchasesTap into the line of credit by making a direct deposit to your checking account, or by using a debit card linked to the account
Minimum balance to be paid each month and interest charged for late paymentsMinimum monthly payment (based on interest charged and average daily balance
Expensive cash advancesNo cash advance fees
You can avoid interest charges by paying your statement balances in fullYou can pay off your balance and borrow again as often as you’d like
Based on your personal credit historyHelps to build a credit history for your business
You can receive rewards for your business spending such as airline pointsDoes not include rewards or benefits
There is usually a joining fee or renewal feeMay have opening, renewal or maintenance fees

9 reasons businesses may choose to use a business credit card

Business cards work in a similar way to personal credit cards, in that they both offer credit up to a set limit, have regular costs such as an annual fee and interest charges, and are paid off over time. Both also offer extras such as rewards programs or free insurance. But they also have some key differences, with some of the extra features of business cards appealing to many small businesses.

The advantages include:

  1. Business transactions can be separated from personal - This simplifies bookkeeping and makes things easier for accounting purposes and at tax time.
  2. Additional cards can be obtained for other employees - This makes purchases easier for employees and the business – employees don’t need to pay for purchase out of their own pocket and there is no need for the business to reimburse them.
  3. Spending controls - Credit limits and cash transaction limits can be set for each cardholder.
  4. Expense tracking is available - These reports assist with a business’s financial reporting and budgeting.
  5. Higher credit limits than personal credit cards.
  6. Rewards programs - Business credit cards often offer more exclusive reward benefits than those available through personal credit cards. The points can be used for travel, gift cards or merchandise for employee bonuses at the end of year, or even redeemed as cash back.
  7. Potential tax deductions for card fees
  8. Some offer free insurance policies
  9. Special discounts for purchases are often available

How do you apply for a business credit card?

The process of applying for a business credit card is similar to applying for a personal credit card, but you’ll need more information on hand.

  • Determine your eligibility
    There are stringent requirements for business credit cards. Applicants generally need to be over 18, be an Australian resident or citizen, demonstrate a good credit history and earn more than the designated annual income threshold.
  • Compare cards
    To determine which is the most suitable for your business.
  • Apply
    This can usually be done online, but you’ll need to have the necessary documentation and details ready, including a valid ABN number, financial records and details of any additional cardholders.
  • Receive approval and card/s
    Normally a response to your application submission will come quickly, but approval won’t be instant as time is needed to review documents and assess the information provided. If you’re approved, the card is usually issued within 5 to 10 business days, and just needs to be activated before you can start using it.

What to consider before you apply for a business credit card

There are many different types of business credit card, including rewards cards, interest-free days cards, low rate cards and corporate cards. Shop around to find the product with the most suitable and beneficial features for your business. While low fees, low rates and high rewards are attractive, you also want card features that will make it cost effective for your business.
Remember a business credit card limits spending to business expenses only.
Fees and interest rates for business credit cards are generally higher than those for personal credit cards because they have more features. They can also be more expensive than other loan types, as credit cards aren’t secured by collateral like loans are. Charges can add up if you don’t pay the balance off every month, so consider how you will use the card.

Business Credit Card FAQ

What information do I need to apply for a business card?

In most cases, you will need to provide basic information about yourself and your business. Additional information, such as the legal business name, business structure, date it was formed, and your business’s total annual revenue may also be required.

How long will it take to receive my card??

This will vary, depending on the lender. Most individuals find that their business credit card will arrive within 7-10 days after approval.

Are business credit card expenses tax deductible?

Generally, most ordinary business expenses are tax deductible and this can include the costs and fees associated with maintaining your business credit card. Always ask your accountant about which business tax deductions are applicable to you.

What should I look for when shopping for a business credit card?

Two of the most important factors you’ll want to consider include the interest rate and any rewards offered. You want your business credit card to provide you with plenty of benefits, as well as to offer a system that works best for your business. It is recommended that you always read your business credit card policy carefully. See the section titled “9 reasons businesses may choose to use a business credit card” above for more factors to look for when choosing a business credit card.

Still not sure if a business credit card is right for you? Compare other types of financing to learn more.

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