A business credit card can be an invaluable tool for accessing credit and can provide many benefits and rewards under the right circumstances. However, as with any credit card, choosing one which works for you and your spending will depend on the available features and the associated fees, writes financial adviser Helen Baker.
So what are some of the most common business credit card fees you should be looking to escape? If you can cut back and avoid these fees, you could save hundreds or thousands of dollars over a year.
1. Cash advance fee
Credit cards usually have two types of credit fees, the purchase rate and the cash advance rate. The purchase rate refers to the interest rate applied to purchases made with the card, and the cash advance rate is the interest on cash withdrawals made with the card.
The cash advance rate is often significantly higher than the purchase rate. There should be no reason that cash is withdrawn from your credit account and not from a business chequing account.
2. Overseas fees
Foreign currency conversions charge an additional fee for transactions made outside of Australia, and there is an additional fee for a cash advance made in a foreign country. If your business involves regular travel, or if there are multiple business credit cards in use by various employees, make sure to limit and monitor overseas expenses. Foreign currency conversion fees are generally around 3 per cent – which can quickly add up if you are not careful with how you use your business credit card.
3. Annual fees
When comparing credit cards, it is always beneficial to weigh up the value of any rewards or features offered by the card against the annual fees charged by the card issuer. The easiest way to determine the value of your card fees vs rewards is to calculate how much you spend each year, then calculate how many points you will earn and the associated value of these points (simply divide the number of points required to redeem a reward by its cost in a retail store). Then compare the value of your points with the fees included with the card.
4. Late payment fees
Late payment fees are charged when you miss the due date, while over-limit fees are added when your balance exceeds the available credit. If you are finding that you are unable to clear your credit card balance each month, you may wish to consider looking for a more suitable card. Particularly when comparing the value of any features or rewards offered by a business credit card, any fees you are charged on top of your standard annual fee will quickly devalue any benefits you may receive from your spending. Consider creating a recurring calendar reminder ahead of each bill being due so that you pay it on time every time and avoid paying fees for late payments.
5. Scam payments
As busy business owners, it is not uncommon to overlook bank statements and pay credit card bills without reviewing it. However, this could prove costly when payments have been made on purchases you never made, and are in fact, expenses made by scammers. Looking at your bill each month and verifying each expense will allow you to identify scam payments and rectify it quickly so that it can be reversed.
Business credit cards can provide great value in the right circumstances, but if you find that your card is not working for you, consider comparing other credit cards in the market to find a more suitable option.
About Helen Baker
Helen Baker is a financial adviser, author, speaker and spokesperson for online finance information platform Money.com.au. Helen has a passion for empowering Aussies to find financial freedom through strategic planning and goals-based financial advice. She has worked as a qualified financial adviser since 2009 and was a finalist in both the Financial Planner/Advisor of the Year and Women’s Community Program of the Year categories in 2017 as well.