A business credit card can be a useful tool for many companies. They can provide a convenient means of making everyday business purchases, managing expenses, and earning rewards. However, with so many different business credit cards available it can be challenging to determine which one is the best fit for your business.
In this article, we’ll go over the factors you need to consider such as your business credit needs, credit card annual fees, and the reputation of the credit card provider. With these in mind, you’ll be empowered to sift through the options and find the best business credit card for your business needs, goals, and budget.
What are business credit cards?
A business credit card is a financial tool designed for companies to manage their expenses, purchases, and payments. Unlike personal credit cards, business credit cards are tailored to meet the unique financial needs of companies. They offer features that allow businesses to monitor their expenses and control employee spending. They are usually issued in the name of the company, and the credit limit is based on the business’s creditworthiness and financial history. They can be used to pay for various business expenses, such as office supplies, travel expenses, advertising costs, and more.
For more information before continuing, check our article on how business credit cards work.
Conditions and benefits to consider
When comparing business credit cards, it’s important to consider various metrics that can help you compare different options and choose the best one for your business.
Each of the key figures below can impact the overall value and benefits of a credit card, and it’s crucial to weigh them against your business needs and priorities.
Interest rates
Perhaps the most obvious factor is the interest rate for credit cards. A lower interest rate will save you money but benefits like interest-free days and fixed or variable periods can change the formula. The interest rate usually sits between 10% and 20% per annum, but this changes over time and is different for every provider.
Spending limit
Much like personal credit cards, most business credit cards have a spending limit. This limit is the maximum amount that a business can charge the card and stops the credit card holder from overspending. This limit is often based on the creditworthiness of the business, so a business with a low credit history will have a lower limit than others.
Minimum revenue
When applying for a corporate credit card, some providers may require that your company meets a minimum revenue requirement before they can approve your business card application. This requirement is designed to ensure that the business has a reliable and stable source of income to pay off its credit card balance.
Reward programs
Many business credit cards offer a rewards program as an incentive. These vary by provider, for instance, the Qantas Business Rewards Card gives frequent flyer points when it’s used, while others offer incentives for spending money in the first few months after acquiring the card, bonus points or cash-back programs for spending money on certain eligible purchases.
Annual fee
Card providers issue an annual fee for holding their credit card or upon the account opening. This can range from a few hundred to a few thousand dollars depending on the number of cards needed and the size of the account. Sometimes this fee goes towards providing other benefits, like the rewards program or cashback, but many don’t provide enough value to justify the cost.
Complimentary travel insurance
A common benefit for business credit card providers is travel insurance. It provides coverage for a range of travel-related expenses, such as flight cancellations, lost luggage, and medical emergencies, when the cardholder pays for the travel expense using corporate credit cards.
The specific details and coverage of the complimentary travel insurance can vary between credit card providers and credit cards. Of course, this only matters if you or your employees travel a lot, and is one of the main benefits that is provided by the annual fee.
Provider reputation
A provider’s reputation reflects their overall level of trustworthiness, reliability, and customer service, which can directly impact the cardholder’s experience with the credit card. A provider with a good reputation likely has a strong history of responsible lending practices, transparent terms and conditions, and a commitment to customer satisfaction. This can provide peace of mind for business owners, who may rely on their credit card for important business transactions.
Is a business credit card the best choice?
A business credit card can be a useful tool for managing cash flow, making purchases, and earning rewards or cash back. However, they have a few disadvantages compared to other finance solutions, like business loans. Credit cards typically have a lower credit limit, commonly around $50,000, compared to the $250,000 available from an OnDeck business loan. When trying to make a larger purchase or acquire a long-term investment, the more favourable repayment terms and higher limit of a loan could be more appropriate, with a business credit card being more useful for everyday business purchases.
While a business credit card may not have strict credit history requirements, a business’s creditworthiness does impact the limits and fees placed on its card. If a business has poor credit, this may make the terms too limiting to use the card as needed. Business loans from OnDeck require a minimum credit score of 500, which you can check for free without leaving any footprint using our Know Your Score tool.
If you decide a business credit card is the right choice for your business, read up on how to apply for a business credit card.
Prepared by OnDeck Capital Australia Pty Ltd ABN 28 603 753 215 (“OnDeck”) for general information purposes only. Content may belong to or have originated from third parties and OnDeck takes no responsibility for the accuracy, validity, reliability or completeness of any information. Information current as at March 2023. You should not rely upon the material or information as a basis for making any business, financial or any other decisions. Loans issued in Australia are subject to the terms of a loan agreement issued by OnDeck. Loans are subject to lender approval. OnDeck® is a Registered Trademark. All rights reserved.
