Compare Business Credit Cards

What features should you look for in a business credit card?

The kind of business credit card you choose may come down to whether you are more of a ‘revolver’ or a ‘transactor’ when it comes to spending. These two terms, broadly speaking, describe different ways of using a credit card.

A ‘revolver’ is a person or company that generally carries or ‘revolves’ a balance from month to month, making minimum repayments necessary, while a ‘transactor’ is a person or company that generally pays credit card bills in full by the due date.

If you are more of a ‘revolver’:

If you think you are likely to ‘revolve’ debt from month to month, you may consider a business credit card with a low interest rate and annual fees. You may consider approaching cards that offer big rewards with a degree of caution, as these cards can come with higher interest rates attached, and if you ‘revolve’ your balance from month to month, you might find that you are paying large amounts of interest. You could even find yourself in a debt spiral if you are unable to manage your credit card debt.

If you are more of a ‘transactor’:

If you think you are likely to pay the balance of your credit card statement in full each month, then you may consider looking for a business credit card that has the maximum number of interest free days and a low annual fee. If you can find a card that has a rewards program that you believe may be beneficial to your business, then you might consider this. If you pay your balance in full each month, the higher interest rates that come with rewards cards may not be as big of an issue for you.

If you are a ‘transactor’, it is important to remember to pay off the balance of your credit card with each statement, because if you miss payments, fees and interest can outweigh the benefits you get from the card.

Whether you are more of a revolver or a transactor, it is important to first consider your financial position before applying for a credit card, and deciding what you can afford and what might best suit your needs.

What are the most common business credit card fees?

There are a number of fees that may apply to your business credit card. See your card’s Product Disclosure Statement (PDS) and Key Facts Sheet (KFS) for details on all fees that may apply to your account. Some common fees include:

• Annual or account-keeping fees: A monthly or annual account-keeping fee charged by your lender to cover the administration cost of maintaining the line of credit. An annual fee is more common on rewards credit cards.
• Cash advance fees: A cash advance is when you get cash out or purchase foreign currency using your credit card and the bank charges a fee to provide this cash.
• International transaction fees: Most banks charge a fee to process a purchase you make overseas. They can also charge a conversion fee when the purchase is made in a currency other than Australian dollars. These fees are usually a percentage of the purchase price, so can add up quickly.
• Late fees: If you do not pay the minimum amount due on your monthly bill, you will be charged a late fee. One great trick for preventing this is to set up a direct debit automatic repayment for the minimum amount every month.
• Non-bank ATM fees: A fee charged by your bank when you use an ATM from a different bank. Some banks will even charge you to make a balance enquiry on your card using another bank’s ATM.

Business credit cards glossary of terms

Please note that these are a general explanation of the meaning of terms used in relation to business credit cards. Your bank or financial institution may use different terms, and you should read the terms and conditions of your credit card carefully to understand all fees, charges and interest rates that may apply to your card.

Annual fee or account-keeping fee: An annual or monthly account-keeping fee charged by your lender to help cover the administration cost of maintaining the line of credit. An annual fee is more common for rewards credit cards.

Automatic transfer: A system that is set up to automatically transfer money from one bank account into another account at a certain point in time to coincide with bills or payments. You can set up your business credit card to automatically transfer when business bills come in.

Average daily balance: The balance of your credit account is determined by adding up all balances during the month and then dividing the total sum by the number of days in a given billing cycle. Most credit card providers calculate the daily balance based on the annual interest rate.

Balance transfer: Transferring the outstanding balance on your credit card to another card, usually one with a lower rate.

Balance transfer fee: A fee charged when you make a balance transfer. It may be a flat fee or a percentage of the amount you transfer.

Bankruptcy: This is when a business’s debt problems become so serious that it is unable to pay its existing debts and bills. When this happens, the business owners can apply to a court to have the business declared ‘bankrupt’, and any assets the business owns can be ‘liquidated’ (sold to pay off existing debts).

Cash advance: Withdrawing cash from a line of credit. Usually incurs additional fees or a higher rate of interest.

Cash advance fee: A fee charged when you make a cash withdrawal from an ATM using your credit card. The bank may charge a flat fee or a percentage of the amount of the cash advance.

Credit limit: The maximum amount your business can spend using the credit card before having to pay off some of the balance.

Creditor: A lending agency to whom your business owes money.

Debit card: Also known as a bank card or a cheque card. Allows you to access the money in your savings or checking account electronically to make purchases.

Default: When a business fails to fulfil their obligation to make the minimum necessary payment on their credit card. Defaults negatively affect the credit rating of a business.

EFT: Electronic Funds Transfer. The transfer of money between accounts by electronic machines like ATMs, home computers, and EFTPOS machines.

EFTPOS: Electronic Funds Transfer at Point Of Sale. Usually refers to a small machine that merchants use to receive payments from customers’ credit and debit cards.

Full balance: The entire amount owing on your card that month, including any purchases made that month, any amounts unpaid from previous month’s bills, and any interest or fees charged.

Gift card: A card with a pre-paid amount placed on it, similar to a debit card. The amount is usually small, up to a few hundred dollars, and in business situations, the card is typically given as a holiday gift or a bonus reward to employees for outstanding service.

Interchange fee: Fees paid between your bank and a merchant’s bank to accept card-based transactions.

Interest rate: The rate at which your outstanding balance increases per month if your bill is not paid or not paid in full.

Interest-free days: The number of days your business has to pay a bill in full before interest is charged on the balance. It is the period of time between the date of a purchase and when the payment is due.

Introductory rate: An interest rate charged when you first sign up for a credit card, offered to entice new cardholders. These rates are usually very low, but revert to the standard rates after six months or so.

Merchant: A business that sells goods or services to customers for payment.

Minimum interest charge: The minimum amount of interest you would be charged if you are charged any interest. For example, if your total interest charge is $0.75 but the bank’s minimum interest charge is $1.00, you will be charged $1.00.

Minimum payment: The number listed on your bill as the minimum your bank requires your business to pay its credit card for that month.

Ombudsman: If you have a dispute with your business banking institution and haven’t been able to resolve it through the institution’s internal complaints resolution process, you can contact the Australian Financial Complaints Authority (AFCA). AFCA helps people resolve disputes with their financial institutions.

Overdraft: An overdraft occurs when you write a check, make an ATM transaction, use your debit card to make a purchase, or make an automatic bill payment or other electronic payment for an amount greater than the balance in your savings/debit/checking account. The bank extends credit up to a maximum amount (the overdraft limit) and you can make withdrawals up to that limit. Interest is charged on the fluctuating daily balance.

Overdraft fee or overlimit fee: A penalty fee charged to you for exceeding your credit limit.

Penalty fees: Fees charged if you violate the terms of your cardholder agreement or other requirements related to your account. Penalty fees include late fees and overdraft fees.

Pre-approval: An initial approval notification that provides a business with an estimate of the credit limit they would be approved for if they applied for a line of credit.

RBA cash rate: The overnight interest rate that the Reserve Bank of Australia offers financial institutions to settle-up on inter-bank transactions. This cash rate influences the interest rate that banks give each other.

Revolving account: An account in which there are not a scheduled number of payments and the full balance doesn’t have to be paid off monthly. Credit cards are the most common type of revolving account. They can be contrasted with business loans, which must be paid off in a certain timeframe.

Rewards program: Benefits that come with the use of a credit card, often in proportion to the amount of money spent on it. Can come in the form of cash back, shopping vouchers, frequent flyer miles, and general rewards.

Universal default: When one financial institution treats a lender as if they had defaulted when the lender defaults with a different institution.