Manage your cash flow, save time on expense reports and enjoy perks such as points for your spending with a business credit card.
What's in this guide?
- Business credit cards vs. personal credit cards
- Types of business credit cards
- How to compare business credit cards
- How to apply for a business credit card
- Frequently asked questions
What is a business credit card?
You can use a business credit card to free up cash flow by using a line of credit to pay for business expenses. They can also offer features including rewards programs, additional cardholders and expense reporting systems. Unlike a personal card, the company may be liable for the debt on a business credit card, not the individual.Business credit cards vs. personal credit cards
Unlike personal credit cards, business credit cards are designed specifically for work spending and often include features such as additional cards for employees, customisable spending limits for different users and expense tracking. Some business credit cards may even have analytics tools designed to help with business reporting and budgeting. In most other ways, business credit cards are similar to personal credit cards. With either option, you’ll get access to funds up to a certain limit and be able to pay off what you spend over time (with interest charges). Both personal and business credit cards can also include costs in the form annual fees and interest rates, as well as extras such as rewards programs or complimentary insurance.
Who is responsible for the credit card? Personal vs. business credit card liability
Depending on the situation, either the individual cardholder or the business might be liable for charges and debts on the account. This liability determines who is responsible for managing the card and can be an important factor when choosing a business option.
Personal liability credit cards
You as an account owner and cardholder might be personally responsible for the business credit card.
- The primary account owner is personally responsible for managing the account even if there are multiple cardholders.
- You’re responsible for how much of the balance is paid off by the due date each month.
- If a payment is late or missed, it’s you who the credit card company will contact.
- Your credit card application may be based on your personal financial details rather than the business’.
Business liability credit cards
Or, a business rather than an individual might register a business bank account with linked credit cards.
- With business liability, it is the business entity that is responsible for managing the account.
- If there is an issue with the account, the entire business may be held responsible, rather than one individual cardholder.
- It can be useful if you are a partner in a business, or for companies that want to easily facilitate the business activities of a number of cardholders.
What about business charge cards?
A charge card acts as a short-term (usually monthly) loan to a business for any purchases charged on the card. These cards defer payment until the end of the statement period, when you’re required to pay off the account in full. Interest rates do not apply to charge cards as there is no revolving line of credit, but they often apply hefty late fees if you don’t pay the balance in full by the due date. Business charge cards are designed for organizations that have the financial stability to clear their balance each billing cycle, which will typically be between 25 and 51 days. If you are looking to borrow funds over a longer period of time, business credit cards may offer more flexibility. Despite these different account structures, charge cards do have many similar features to conventional credit cards, including expense tracking tools, supplementary cards, rewards programs and complimentary extras. As a result, they are often put in the same category as business credit cards.
Types of business credit cards
Whether you’re looking to keep your business’ credit card costs low, want to earn rewards points as you spend or want to take advantage of interest-free days, there are business credit cards on the market to suit many different types of cardholders:
Rewards business credit cards
These cards reward you for paying with a credit card, usually offering a reward or frequent flyer points for spending on eligible purchases. Unlike personal credit cards, a business credit card with rewards will let you earn points on your work spending. It’s important to remember that these cards may come with higher annual fees and interest rates, so you’ll need to make sure that the value of the rewards will outweigh any costs.
Frequent flyer business credit cards
This type of rewards business credit card is often linked to an existing frequent flyer program. Some business frequent flyer credit cards allow you to directly earn frequent flyer points for every $1 spent on the account, while others let you transfer rewards points to a wide range of frequent flyer programs.
Low rate business credit cards
These business credit cards have low standard variable interest rates for purchases and can give companies a more affordable option if they need to pay off spending over a longer period of time. Many low rate business credit cards also have a low annual fee, which makes them popular for small businesses that need a cost-effective way to finance major expenses as they arise. They can also suit businesses that want a credit card on hand for any unexpected costs, or have seasonal and variable amounts of revenue.
Low fee business credit cards
Similar to low rate options, low fee business credit cards are designed for companies and sole traders that want affordable access to a line of credit. These cards generally have lower annual fees than others, and might even waive fees entirely if certain conditions are met. This type of feature can make having a business credit card more affordable.
Business credit cards with interest-free days
These credit cards offer businesses a competitive interest-free period for making purchases. A range of business credit cards offers an interest-free period (for example, “up to 55 days interest-free”) if you pay your balance in full by the statement due date. Depending on the card, they may include other features such as rewards, low fees or complimentary insurance. Other business credit cards with interest-free days may actually be classified as charge cards, with no interest rate or pre-set spending limit and a requirement to pay off the entire balance by the statement due date. Both of these types of interest-free options are suited to businesses looking for a short-term cash flow solution.
Corporate business credit cards
These credit cards are designed for larger businesses that want one account for business expenses. Corporate business credit cards can offer dozens of supplementary cards and can let businesses set individual spending limits for each of them, and track spending on a per card basis.
How to compare business credit cards
Comparing business credit cards side-by-side allows you to find an option that is suited to your business’s specific needs. Some of the core factors to compare when weighing up business credit cards include:
Business spending habits
It’s important to choose a business credit card that matches your existing business spending. Business cards that offer a lot of “bells and whistles” may seem like an attractive offer, but not all offers will help maximize value while operating your business. Choosing a card should depend on the types of transactions your business undertakes. In credit card terms, this would include eligible purchases, capital expenses, additional cardholder spending, and business travel needs. You can then match the types of transactions with the card features. For example, if your business uses a credit card for flights and regularly pays it off, a frequent flyer card might offer competitive value. On the other hand, if your business relies on the card for credit, a low rate, low fee or interest-free days business credit card might be the most affordable option.
Fees and charges
Business credit cards feature a range of fees and charges. Some of the most common include:
- Annual fees. Business credit card annual fees can vary widely, and might range from $0 to $700 (or more).
- Supplementary cardholder annual fees. While some business credit cards offer additional cardholders at no extra cost, others may charge fees, such as another $50 per cardholder per annum.
- Standard interest rates. Business credit card interest rates will vary between card and transaction type, with some cards charging the same rate for all transactions and others applying different rates depending on whether it is a purchase, cash advance or balance transfer.
- Currency conversion fees. This charge is applied for transactions made overseas or in a foreign currency and is typically around 3% to 3.5% of the transaction value.
- Minimum required monthly payments. Business credit cards may have varying minimum payment requirements unless they are charge cards that need to be paid in full for each statement cycle.
- Overlimit fees. If you or an employee goes over the credit limit on the account, a fee may be applied.
- Late payment fees. If you don’t make a payment on your business credit card, you could be charged a fee may be applied. This cost is usually around $10 to $30 but could be higher for some options, particularly charge cards.
- Feature or establishment fees. Some corporate credit cards may charge additional fees for using certain features of the card or establishing a loan or overdraft on the card.
Extra perks
- Exclusive business rewards. Business credit cards can provide access to exclusive rewards benefits that are outside the scope of personal credit card users. Other rewards perks can include free delivery and express shipment.
- Online business banking. Business credit cards usually give you all the access you would expect from banking online, such as 24/7 access to your account plus business security options such as encryption technology for peace of mind. Business applications may also allow mobile management so you can bank on-the-go with your business.
- Complimentary insurance. Many business credit cards include complimentary travel insurance and liability insurance for the account.
- Expense management systems. Keeping on top of business expenses and consolidating your credit card transactions can be difficult amongst the other million tasks involved in running a business. Expense management systems give you control and simplicity, providing an all-in-one solution for:
- 24/7 monitoring, budget tracking by creating standard or custom reports, clear visibility of company spending and recognizing patterns to better manage cycles in spending.
- Multiple reporting formats including MYOB, Microsoft Excel, Word, PDF, HTML, XML, CSV and Tab-delimited.
How to apply for a business credit card
If you’re interested in getting a business credit card, the first step is to compare a range of options to find one that is convenient and affordable for your business. Once you have found one, you can usually apply online. Before you apply for a credit card, you’ll need to make sure that you meet the following eligibility requirements and have organised the necessary documents to complete the application:
Eligibility requirements
- Age. You must be at least 18 years of age to apply for a business credit card in New Zealand.
- Residential status. You may need to confirm your residency status to apply. Your options may vary depending on residency status.
- NZBN. You may need to provide your New Zealand Business Number (NZBN) to apply.
- Credit report. An issuer may check your business’ or your personal financial history.
Necessary documents and information
The other details you will be asked to provide vary depending on the card and whether you choose a business liability or personal liability option. But generally you will need to provide:
- Contact details. Contact details for you and/or your business.
- Proof of identification. A valid form of identification, such as your driver’s licence or passport.
- 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.
- Additional cardholders. If you wish to manage your employee’s spending under the one account, you’ll also need to provide the details of any supplementary cardholders.
- Other documents. Supporting documentation such as personal tax statements, pay slips and BAS reports may also be required.
