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How do business credit cards work?

by OnDeck Australia,   Sep 22, 2021

How do business credit cards work?


Business credit cards are great for business owners who have a hard time managing their cash flow and need to make payments in advance. If you’re interested in using a business credit card, it’s important to know how they work.

The following will explain how business credit cards work and how they can benefit your business.

What is a business credit card?

A business credit card is like a personal credit card, except that it can only be used to pay for business expenses. This includes office equipment, marketing and advertising services, travelling expenses for you or your employees, paying employee wages, and more.

Business credit cards are usually offered through a company’s bank. Each card has its own set of terms and conditions that could be different from those associated with a personal credit card. In addition, each card may have different interest rates, annual fees, and rules when it comes to how much you can spend with the card and how often. For example, some business cards do not allow you to make cash withdrawals from an ATM, while others will charge a fee for doing so.

How does a business credit card work?

A business credit card operates like a regular credit card. It allows you to make purchases by swiping/tapping it at a point of sale system, or by entering its details during an online transaction. Whenever you use your business credit card, no matter how small or large the purchase is, it will be recorded as a transaction on your monthly invoice from your bank.

Your business credit card will have a credit limit attached to it. Your credit limit is how much you can spend using your business credit card. Your monthly invoice will show how much credit you have left to spend. If you exceed your credit limit, your card won’t work until you’ve paid back an agreed amount on top of the outstanding balance.

Many business credit cards offer some sort of rewards scheme, where you earn points for using your card. Points can be redeemed as cash either against your balance or towards future purchases.

Most business credit cards give an introductory period when there are no interest charges until the first statement date – after this, you’ll be required to make a minimum monthly payment which will include any interest charged.

How can you get a business credit card in Australia?

To get a business credit card in Australia, you need to apply for one with your bank. You’ll need to provide your bank with some documents that prove your business is a legitimate operation (such as a company ABN and tax returns). How long it takes from application through to approval will depend on how thorough you have been in providing all the documents required.

There are several things to consider before applying, such as how much of a credit limit you’ll need and how long the card should be valid for.

If your business has been operating for less than 12 months, there’s no guarantee that you’ll get one, although some lenders offer business cards to businesses with an ABN even if they’re less than a year old.

What are the benefits of business credit cards?

Supporting your cash flow

Business credit cards are a great way to manage your business’s cash flow. While you’re waiting for invoices to be paid, business credit cards let you draw on an extra line of credit when you need it.

Payments can be made automatically from your business bank account so that the expense is covered as soon as funds become available. You can also set up direct debits so that you pay your card off automatically each month. This is how most small business owners use their business credit cards.

Building your business credit score

In the same way that personal credit cards can help you build your personal credit score, business credit cards can help you build your business credit score. This can help you access higher levels of finance with a better interest rate since you are using your business credit card to demonstrate good financial management.

The key is how often you use your card and how well you manage it.

It’s important to remember that with any credit card, no matter how focused its purpose is, you need to manage it carefully. With business credit cards, how you manage your account will reflect how well you run your business – and how reliable a client you are likely to be.

Good business credit card management practices include:

  • Paying on time – Payment history is one of the biggest factors taken into account in approving a new credit application; missing a payment can leave a bad mark on your credit file that may make it difficult to get credit in the future.


  • Not exceeding your credit limit – If you exceed your credit limit, you’ll attract interest charges and overlimit fees. Fees and interest charges make paying off your balance more expensive.


  • Keeping a low balance – Business credit cards are meant to be used for convenience, not as a way of borrowing money. Credit limits exist to ensure providers aren’t out of pocket if you can’t repay what you owe at the end of each billing period. If you pay off everything you owe, then you’ll avoid paying interest charges and fees.


  • Keeping up to date with statements – Business credit card issuers usually send monthly or quarterly statements that show how much you’ve spent throughout the billing period. Reading your statements regularly will help you know how much money you owe for each transaction, how much is still owing on a purchase, and how much you’ve spent in total.

Earn rewards on business expenses

A business card also lets you earn rewards on your business purchases, such as frequent flyer points, gift cards or cash back. Rewards programmes are a great way to get savings and enjoy special perks on the things you buy regularly.

Depending on your level of business spending, your reward can make quite a difference at the end of each billing period. Optimising the use of your rewards program is key for getting the most out of your business credit card.

How should you compare business credit cards?

When you’re shopping around for a business credit card, you should take a look at how much the card will cost you to use. You should consider how much it costs for your business to make purchases with the card, how many rewards you can earn, and how generous those rewards are.

Ask yourself how you’ll pay off your balance each billing period. Will any of those payments come out of savings or from money that your business generates in earnings? In this case, how quickly would you need to pay off the balance each month in order to avoid interest charges?

Also, consider whether or not you really need a business credit card at this stage. If you need to finance new equipment or pay for any other business expense, it may be better for you to take out a business loan instead.

If you are looking for a flexible business loan, OnDeck could help. OnDeck offers business loans ranging from $10,000 to $250,000 on 6-24 months terms. Enjoy an easy application process with low loan origination fees of only 3%.

Frequently Asked Questions

How does a business get a credit card?

A business credit card is issued by a bank or other financial institution. Depending on their circumstances, the business owner may have to provide a personal guarantee.

What is the purpose of a business credit card?

The purpose of a business credit card is to help pay for business expenses up to a certain pre-determined limit (credit limit). Most small business owners use business credit cards to support their cash flow and maintain easy access to funds when sudden expenses arise.

Are you personally liable for a business credit card?

Whether or not you are personally liable for a business credit card depends on the size of your business and the type of agreement you entered into. Some business credit cards may not require a personal guarantee.

What is the limit on a business credit card?

The credit limit on a business credit card will vary depending on your businesses’ creditworthiness. The larger your capacity as a business, the higher the potential limit on your 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 September 2021. 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.

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