Many businesses use company credit cards as a convenient financing option to cover essential and other business expenses. They are one of the most widely used forms of payment.
Company credit cards also allow businesses to keep their personal and business expenses separate.
A wide range of credit cards is available to Australians. Therefore, choosing the best business credit cards that align with the business goals can pose quite a challenge.
In this comprehensive guide, we’ve outlined the features to look for when choosing a business credit card. Let’s discover what makes this type of credit card perfect for small business owners.
Key Features To Look For In A Company Credit Card
Company credit cards are specifically made to meet the needs of businesses of all sizes. They are a specialised category only issued to registered businesses and should be used only for business purposes.
Using a company credit card, businesses may pay for their fixed expenses (rent and utilities), fluctuations in cash flow, or cyclical needs.
The key features of the best company credit cards usually include the following:
- Reward programs
- Introductory offers and bonuses
- Credit limits
- Interest rates (APR)
- Expense management tools
- Fees
Reward Programs
One typical key feature of business credit cards is the reward programs they offer companies. With a reward program, businesses can get additional benefits on top of the funds for business expenses.
The types of rewards that may be included in a business credit card are:
- Cashback on specific amounts or certain amounts of transactions
- Points (redeemable for discounts on hotel stays, purchasing supplies, etc.)
- Travel miles
- Airport VIP lounge access
Different lenders will have different reward programs for their business credit cards. When businesses apply for a credit card, they should tailor the rewards to their business spending habits to get the most out of the card.
Introductory Offers And Bonuses
Another critical feature of business credit cards is the various introductory offers and bonuses. Some credit cards provide businesses with introductory APR promotions, often in the form of 0% APR periods. This period typically lasts longer than the one for personal credit cards.
Company credit cards generally provide generous sign-up bonuses, often in the form of free travel or a cashback welcome offer. Lastly, there may also be waived or limited fees for additional cardholders and foreign transaction fees, which may help save money.
Credit Limits
Because business credit cards work similarly to personal ones, businesses will get a set limit. When choosing between different business credit card offers, companies must consider each one’s credit limits.
This is important in order to choose a credit limit that suits their business needs. Generally, the credit limit will depend on the company’s income and credit score. With a higher credit limit, businesses may be able to maintain a low debt-to-credit ratio. They can also maintain a better credit score.
Interest Rates (APR)
As mentioned above, many business credit cards offer a 0% APR period. This interest-free period usually lasts for business purchases for the first 12 months.
Expense Management Tools
The last key feature of business credit cards is the built-in expense management tools. With these tools, companies may easily keep track of their spending and effectively manage cash flow. The tools may be for tracking expenses, setting limits, and generating reports.
How To Choose The Ideal Credit Card For Your Business
- Assess your business needs: Companies should identify their most frequent expenses, such as travel, office supplies, advertising, etc. This way, businesses will be able to choose a credit card that will cover those expenses and provide perks related to them.
- Consider your cash flow: Based on the business’s cash flow, businesses can choose between a low-interest card or a rewards-focused card. Low-interest rate cards are more suitable for businesses that need a constant cash flow, while rewards-focused cards may be more beneficial for a business that requires frequent travel.
- Understand the importance of building business credit: By using a company credit card for their expenses and repaying it in time, businesses can build their credit scores. Better credit scores may help them qualify for larger loans in the future.
- Evaluate perks and benefits: Companies should focus on choosing credit cards with value-added features like insurance, travel perks, or purchase protection.
- Factor in employee use: For businesses with a larger number of employee teams, it is better to consider cards that offer multiple employee cards with spending controls.
Common Mistakes To Avoid
- Choosing a card based solely on introductory offers: While the introductory offers may be enticing, it’s vital not to ignore the terms and conditions associated with the business credit card. This is why it’s important to choose a credit card that suits all their business needs.
- Ignoring fees: It’s crucial to keep track of all fees associated with a business credit card, including introductory, annual, ongoing, etc. Ignoring these fees may result in additional penalties and potentially increased interest rates.
- Failing to monitor credit card spending: Businesses should always closely monitor their business purchases made with credit cards to ensure they do not exceed their credit limits and rack up interest.
- Using a personal card for business expenses: If a business owner decides to use a personal credit card for business expenses, it may result in a lower personal score if unable to repay it.
Frequently Asked Questions
What should I look for in a business credit card’s rewards program?
When a company is choosing between credit cards and different rewards programs, they should consider which one is most useful for their business needs. Business cards typically offer rewards in the form of cashback, redeemable points, or travel miles.
Are there any drawbacks to having multiple employee cards on a business credit card account?
The potential drawbacks of having multiple employee cards may include extra costs in terms of additional fees and interest charges. Another drawback is that multiple employee credit cards may increase the business’s credit utilisation, which may result in lower credit scores.
Conclusion
Choosing the best company credit cards means understanding their key features that can benefit the business and help them achieve their goals. With a suitable company credit card, a business may be able to take advantage of all the financial benefits and rewards and utilise them to grow.