Spotlight on Business Credit Cards

24 August 2018

Credit cards can be an underutilised business finance tool so Canstar looks at the advantages they can give bring and the options businesses have.

From a sole trader to an established business, effective financial management is usually front of mind.

“Good cash flow is the lifeline for any business.” comments Canstar general manager, Jose George. “And credit cards are often overlooked as an important tool both in terms of managing and monitoring cash flow. Giving businesses a line of credit, credit cards can mean staff getting paid, new stock ordered and outstanding debts paid.”

Financial benefits

As well as offering accessible credit, a well-managed credit card can also help a business to build a strong credit history. For newer businesses especially, the lack of a credit history can make negotiating loans or finance deals for stock or equipment difficult. A credit card can help build that credit history quickly, demonstrating the business acts responsibly with debt.

They also generate clear up-to-the-minute tracking of outgoings which is not only useful for current budgeting, but for future forecasting too, especially as most can now be integrated with many of today’s accounting software packages.

In some circumstances, a card offering rewards can also generate additional value from essential business expenses.

In addition, a business credit card keeps business and personal spending separate, especially important for small or fledgling businesses.

Choosing the right card

As with all credit cards, choosing the right one and exercising financial discipline is key to getting the card to work for you, and not you working to pay off a rising credit card bill.

In New Zealand there are three main profiles of business credit cards available low fee, low rate and reward generating. Determining your financial behaviours - both in accumulating and repaying debt - is key to identifying which one is right for you and your business.

Ultimately, your card should be helping cash flow through your business, not be an additional expense which can happen if you’re a paying higher than necessary fees or worse, get caught up in a mountain of compounding interest. So, by identifying you spending and repayment habits, you should be able to identify what is right for you.

The three main profiles are:

• Low fee – a good choice if a business does not rely on a credit card as part of its cash flow and only thinks of it as an emergency or back up option

• Low rate – If balances are regularly carried over, attracting commanding interest, this is an option should be considered.

• Rewards – For the businesses who use their credit card frequently but are disciplined at clearing the balance at the end of each month, a rewards card could generate additional value from business spend.

Fees, Charges and Interest

Other factors to consider are the ongoing interest rates and how they are applied to purchases and balances, interest free periods, credit limits and any other fees and charges that could affect the overall worth or value of the facility.

Also, be aware of who is liable for the debt incurred on your business credit card and whether it is the card holder or the business who is responsible for any outstanding balance.

Bank of the Year – Business Credit Cards

As technology continues to influence and drive the evolution of payments systems and options, the business credit card market continues to grow in New Zealand. According to Canstar researchers, BNZ is leading the pack and their comprehensive suite of products and features see them awarded Bank of the Year – Business Credit Cards, for 2018.

Accepting the award on behalf of BNZ, Adam Price, Portfolio Manager, Small Business & Commercial Cards, says:

“There are many factors to consider when looking at business credit cards, but we’re here to help businesses get the process right. This way it doesn’t have to be a ‘one and done’ decision. Our primary role is making sure we deliver the best solution for our business partners”

“The BNZ card portfolio is steadily growing giving customers more choice in how they maximise their cash-flow and generate extra benefits from their expenses, or both. Customers tell us they find both sets of options desirable, and we work hard for our customers to tailor solutions that best meet their needs. We’re delighted that our focus on our customers in this market has been recognised and we are very proud to accept this award.”

For further information, please visit the Canstar website.

ENDS

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