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6 things to consider before getting a business credit card

6 things to consider before getting a business credit card

Knowing the benefits, fees, charges and interest rates will help you choose the card that best suits your business’ needs.

A business credit card can be handy to help separate your personal and business finances and cover cash flow shortages. As well as these benefits, it’s important to also understand the conditions that come with the card you’re applying for. Here’s a guide of what you’ll want to understand before you choose a business credit card.

1. Choose a card that suits your needs

The business credit card type that best suits your business’ needs will often align with how you plan to make repayments.

  • Interest-free period – This type of business credit card gives you a period of time where you pay no interest on purchases. It can help with your short-term cash flow if you have a gap between when your bills are due and when you receive payment from customers.   
  • Low rate – This card type may suit if you may need to carry a balance over from month to month and want to minimise the amount of interest paid.
  • Awards – These cards can be suitable should you choose to pay your total balance in full each month and want to earn rewards for using your card. They usually have higher annual fees than other card types.

All CommBank business credit cards offer up to 55 days interest free on purchases except the Business Low Rate card. The CommBank Business Credit Card selector tool can help you choose a card.

2. Think about how much credit you need

Understanding your monthly business income and expenses can help you gauge what credit limit to choose. When deciding this, consider your business’ circumstances such as how much you can afford to repay each month and any expected monthly cash flow shortages.

You have a few options for your monthly repayments – pay the full balance, the minimum repayment or an amount somewhere between the two. Just remember, the more you repay, the less interest you’re charged.

3. Know how interest is calculated

If you want to reduce your interest payments, pay the full balance by the due date each month and avoid using your credit card to withdraw cash. Two common types of interest charged are:

  • Purchase interest – charged if you pay less than the full balance owing by the due date. The purchase interest rate only applies to transactions that are classified as a purchase on your credit card.
  • Cash advance interest – applies when you use your credit card to withdraw cash. The cash rate applies to any cash amount withdrawn or transferred from your credit card, including purchases of cash equivalent items, such as gambling, lottery tickets and money transfers, and is applied from the date the transaction was made.

Many cards have an interest-free period, so make sure you take advantage of this. All CommBank business credit cards except the Business Low Rate card offer up to 55 days interest free on purchases.

4. Understand the fees

Other charges to think about include:

  • Annual fee – this is a yearly fee charged for having a card with access to certain benefits and features.
  • Late payment fee – charged if you miss a repayment or repay less than the minimum amount by the due date.
  • Cash advance fee – applies if you withdraw cash with your credit card.

Check out the terms and conditions or schedule of standard fees and charges to see the full list of fees and charges.

5. Check liability

Many business credit cards are personal liability business credit cards. This means the person applying for the card will be responsible for transactions on it. Before applying for a business credit card, find out whether the business or an individual will be responsible.

6. Maximise benefits

Make the most of the benefits that come with a business credit card. For example, CommBank Business cards offer cardholders complimentary transit accident insurance up to $250,000.

If your card is a rewards card, you could redeem points earned on purchases for things like:

  • Gift cards
  • Cash back
  • Travel programs.

Typically, cards with lots of rewards generally have higher annual fees and interest rates than other card types.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. You should consider seeking independent financial advice before making any decision based on this information. Applications for credit cards are subject to the Bank’s normal credit approval. Full terms and conditions are included in our Letter of Offer. Bank fees and charges apply. CommBank Business Credit Cards are Personal Liability Business Credit Cards. By applying, you (the individual that is applying for a Business Credit Card) acknowledge that the Business Credit Card you are applying for provides for Personal Liability. We will look to you (and no any company, partnership or other business entity that may employ or engage you) to recover all amounts charged using the Business Credit Card, including any amounts charged by an additional cardholder.