Business Credit Cards - August 10th
What merchant services are available for small businesses in Australia? CANSTAR summarises what's on offer from big banks and the independents.– Read more
Business Credit Cards - July 13th
CANSTAR has released the latest Business Credit Cards Star Ratings research, rating 42 credit cards across 16 institutions. This week, Australians finally discovered the winner of the 2016 Federal Election, with Opposition Leader Bill Shorten calling Prime Minister…– Read more
There are a few different types of business credit card available in Australia:
There are four main brands available in Australia as options for your business credit card, and different banks and building societies offer different brands:
MasterCard was formed in 1966 when 17 banks joined together to form the Interbank Card Association. Since then, MasterCard has become an umbrella for thousands of financial institutions.
MasterCard claims to have many advantages for businesses, including:
Find out more from CANSTAR about the difference between MasterCard and Visa, and MasterCard supporting developing nations to protect against natural disasters.
Visa was formed in 1958 as the BankAmericard, the first credit card program available to small- to medium-sized businesses. It was a simple paper card with a $300 credit limit. In 1976, BankAmericard became independent and united many different banks under the new global brand of Visa.
Visa claims to have many advantages for businesses, including:
Visa can boast about creating the first contactless payment prototype in 1997.
American Express Company was founded in 1850 during America’s westward expansion, as an express delivery business. Its biggest clients were banks who needed to transport small but valuable items such as stock certificates, deeds, bank notes and currency.
In 1882, American Express launched its money order business with almost instant success. They issued their first credit card in 1958, with Elvis Presley being one of the first cardholders of the ‘American Express Card’.
American Express has also been a travel provider since WWI, when it helped to provide emergency travel help for 150,000 American tourists left stranded in Europe in 1914. Today, many of their credit card rewards programs focus on travel benefits.
Some advantages for business that American Express claims include:
Find out more from CANSTAR about the American Express Shop Small campaign for small business owners.
Diners Club was formed in 1950 as the first ever multi-purpose charge card, after businessman Frank McNamara found himself short of cash to pay for dinner one night. He resolved to create a way for anyone to pay a bill in the future without such embarrassment. By 1951, he had succeeded and 10,000 people in New York alone were using ‘The Diners’ Club’ at 28 restaurants and 2 exclusive hotels.
Today, Diners Club Australia is owned by Citi, the largest foreign bank in Australia. You can view an online gallery of all of their previous card designs, from 1951’s cardboard cards onwards.
Diners Club claims many advantages for businesses:
Diners Club can boast creating the first corporate card program designed specifically for businesses, in 1975. They went on to launch their first multi-national corporate card program in 1990.
Diners Club was also the first internationally accepted charge card. Businesses in the UK, Canada, Cuba and Mexico were the first to honour Diners Club, in 1953.
There are a number of fees that may apply to your business credit card. See your card’s PDS for detail on all fees that may apply to your account. Some of the common fees include:
There are many different features that may be attached to a business credit card. These can include:
A summary of the features we assess when looking for outstanding value in a business credit card are contained in the Methodology attached to our Business Credit Card Star Ratings Report.
There are many possible rewards that can be attached to a rewards credit card. Common rewards categories included in these programs include:
The “best” rewards program comes down to how much you spend per year on your card, and what type of reward will be of most value to your business. For example, some rewards programs offer excellent points-per-spend value for business flights, while others offer better value for gift cards to treat your employees.
According to the Australian Bureau of Statistics, there were more than 2.1 million actively trading businesses in Australia in June 2014. This is an increase from 2,016,800 actively trading businesses in 2012.
Australia shows a fairly stable “pass” rate for new businesses. 61.7% of the businesses actively trading in 2014 had stayed in business since before 2010, and half of the new businesses which started up in 2010 were still trading in 2014.
Businesses operating in Tasmania were the most likely to survive from 2010 to 2014, while businesses in the ACT were the most likely to struggle.
How many businesses apply for a line of credit? In 2013-14, around 16% of businesses in Australia applied for debt or equity finance and in terms of debt finance, 84% of those who applied were granted it.
Most businesses operate using at least one credit card. Some businesses use this as a regular spending tool that is paid off each month, while others use it instead of short-term business loans when cash flow isn’t doing well.
Business credit cards make it easy for small business owners to separate business transactions from personal transactions. This makes tax time a lot less stressful when you’re filling in your BAS.
Most business credit cards allow multiple cards on the business credit account, and business owners can set monthly caps for spending by each employee cardholder. Business owners can also choose whether or not to allow employees to make cash withdrawals; restricting cash transactions means you can track every transaction made on a card. This can be a very helpful feature, when 39% of business owners in Australia in 2014 employed 1 or more other staff members.
Some business credit cards come with a rewards program, which can be beneficial for businesses that pay off their card every month. For example, the rewards points can be spent on a business flight to see an important client in person, a bottle of bubbly for the company Christmas party, or gift cards your employees as an EOFY or Christmas bonus.
According to the CANSTAR database in October 2015, interest rates for business credit card purchases are between 11.99% and 20.74%.
Purchase interest rates for low rate business credit cards on CANSTAR database:
Interest rates for standard rate business credit cards on CANSTAR database:
Rates are higher for cash advances, from 11.99% to 21.74%. Rates are lower for balance transfers, from 0.00% to 5.99%, but these cards typically revert to a higher rate after the introductory period.
As with normal credit cards for the individual consumer, interest rates for business credit card are higher when the line of credit is unsecured and lower when the credit is secured. Business credit cards can be secured by residential property or by a commercial interest in the business itself.
Since business credit cards can have higher interest rates than personal cards for the individual consumer, business owners should be careful to pay off their account every month and look for a high number of interest-free days.
On our website, you can also find products for your other business needs, such as business transaction accounts, business savings accounts, business overdrafts, agribusiness accounts, business loans, and business life insurance.
Written by: TJ Ryan
Wondering what type of credit card you should get for your business? This depends on what you intend to use it for. We rate business credit cards for two categories of business credit card user: the Revolver and the Transactor.
The Revolver is a business that keeps a debt on their card and pays interest on the balance, “revolving” the debt from month to month.
When looking for a business credit card, our advice for Revolvers is this:
The Transactor is a business that pays off their credit card balance in full every month.
When looking for a business credit card, our advice for Transactors is this:
No matter what you use the card for, it pays to shop around. Products on the market are continually changing, both in interest rates and other features. Setting aside an hour to compare the current offerings on the CANSTAR website could end up being a great return on investment for your business.
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 a 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 6 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 Financial Ombudsman Service of Australia or the Credit and Investments Ombudsman. These are free and independent services that help 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 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.
All details below are correct at time of writing (September 2015). The providers listed below are the ones that CANSTAR has researched for its most recent Business Credit Card Star Ratings.