What is a business credit card and its benefits?

A business credit card isn’t unlike the other credit cards in your pocket, but it’s only meant to be used for work or business spending. So you won’t use a business credit card to pay for your coffee unless that coffee could be called a business expense, such as if you ordered it during a client meeting. 

As business credit cards are meant to be used by companies instead of individuals, they usually come with features like expense monitoring and other budgeting tools to help you manage your business spending. Business credit cards also typically come with higher spending limits than personal credit cards, as businesses are expected to spend more than individuals.

The main purpose of a business credit card is to provide short-term access to funds. If you’re a business owner, you may find it convenient to use a business credit card to make purchases while you wait for your payments to come through. A business credit card may also serve as an alternative to business loans in some situations for financing big ticket items. But make sure to compare the interest rate and fees before using a credit card for your business expenses.

There are different types of credit cards available for businesses. Depending on your requirements and the size of your business, you could find credit cards with higher spending limits and lucrative rewards programs. But these cards are also likely to charge higher fees and interest rates. Smaller businesses on tight budgets may find credit cards with low or no annual fees useful, but such cards may not offer any rewards or extra perks to the cardholder.

Frill-free, low rate cards

Some banks offer low rate credit cards that could be useful for keeping your business costs low. However, these cards are generally quite basic and may not offer extra benefits like cash back, insurance coverage, reward points, etc. 

Platinum business cards

These cards may be useful if a business needs a higher spending limit and rewards program. Such cards usually offer perks like free flights, concierge service, and discounts on partner hotels, but they also tend to charge a higher annual fee than no-frill credit cards.

Travel business cards

Some banks may offer business cards with frequent flyer programs, hotel discounts and complimentary lounge access. Such travel-related benefits could be helpful if you or your employees need to travel a lot for business. As always, remember to compare different credit cards, including the interest rate, fees and benefits, to find a card that best suits your requirement. 

Balance transfer credit cards

A balance transfer credit card could help you pay off your existing credit card debt by offering a low or zero per cent interest rate during the introductory period. If you’re looking for a balance transfer card, make sure to check the revert rate on the credit card, which is the rate at which you’ll pay interest on your debt once the introductory period is over.

A business credit card offers several advantages for businesses. 

• Separating personal and business expenses

One of the prime benefits of using a business credit card for business expenses is keeping business transactions separate from personal transactions, which simplifies accounting. You can use a business credit card to pay for your business’s regular expenses, manage your cash flow, and even pay your taxes to the ATO. You may also apply for additional cards for your employees and set transaction limits for each cardholder to manage their spending. However, some providers may charge for additional cards, so check the Product Disclosure Statement (PDS) before proceeding. 

• Access to expense management tools

Some business credit cards offer you the additional facility of running in-depth expense reports, which could help with your financial reporting and budgeting. You can also find credit cards with add-ons like free insurance and exclusive reward benefits, but the interest rate is generally higher for reward-based credit cards.

• Building your company’s credit score

Besides making it easier to manage your cash flow, using a credit card may help to build your business credit score if you pay off your bill in a timely manner each month. Conversely, not paying your credit card bills in time will hurt your credit score and make it difficult to qualify for a loan, or a line of credit, if you need it later. 

It’s worth knowing that, generally speaking, business credit cards may charge a higher interest rate or higher fees than most personal credit cards and some types of loans. However, you may be able to claim your card’s annual fees and charges as business expenses in your tax return. But you generally can’t claim the interest you pay on your credit card debt as a tax deduction. 

So, if you intend to use your business card to pay for some equipment or operational costs, it’s worth comparing your other options before swiping your card. For instance, secured business loans generally may offer a lower interest rate than business credit cards. However, having a business credit card gives you access to credit up to a predetermined limit, and you don’t have to wait to get approved for a business loan to make the purchase. 

Whether or not you need a business card depends on your preferences, as well as your company’s cash flow and how you manage it. But if you’re considering a credit card for your business, remember to compare offers from different credit providers and choose a card with reasonable charges and the features you need to get the maximum value out of it. How you use the card is also important, as the interest will add up if you don’t pay off your card in full each month.

Yes,the ATO allows you to claim ordinary business expenses, which may include the fees you pay for using a business credit card. It’s also possible to use your business credit card to pay taxes. This could help you ease your cash flow and you may earn interest from the ATO by paying your return early. However, if you haven’t budgeted for your tax return, paying with your credit card will not have any significant benefit apart from delaying the date by which you need to pay from your pocket. 

Besides, if you’re unable to pay your credit card bill in full, you’ll end up paying a late fee and will be charged a high interest rate on the outstanding amount by your credit card provider. The ATO also charges a surcharge on credit card payments. But you may be able to claim this fee, as well as your annual credit card fee, as a tax deduction. It could be helpful to speak with your accountant regarding what part of your business credit card fees is tax deductible.