Business credit card interest rates hold steady

 

With all the expenses New Zealand business owners face, the last thing they need is a fee avalanche for using business credit cards. Fortunately, Canstar research reveals credit card fees and rates for businesses have held steady over the past year.

As is the case with personal credit cards, there are a number of factors to take into account to choose a suitable business bank product. While the interest rate is definitely up there in terms of importance, it is not the only aspect to consider. And the best value credit card will also vary, depending on the type of business you operate.

Think about the following questions: What type of credit card does your business need? Could the business earn rewards points on spending, or is a low fee or low rate card the way to go?

In 2017, Canstar researched, rated and analysed 16 business credit cards, across three credit card profile types: low fee, low rate, and rewards, to provide a breakdown of what’s available on the market.

Here’s a breakdown of the various business credit card types, and the fees and charges that come along with them.

Low Rate Credit Card Right For Your Business

What type of credit card does my business need?

Canstar is not able to give you personalised advice for your business. However, in general, the most suitable credit card for your business will depend on how you intend to use the card.

Business credit cards usually come in three distinct types:

Business Low Rate Card

What is it? Low Rate business credit cards come with – as the name suggests – a low interest rate and flexible repayment conditions.

What is it useful for? The low rate option may be suited for a business that is revolving debt on the card from month to month.

To be included in Canstar’s business credit cards star ratings, the low rate card must have a credit limit of $10,000, available at the time of application.

What type of credit card does my business need

Business Low Fee Card

What is it? Low Fee business credit cards can have a low or no ($0) annual fee.

What is it useful for? The low fee option may be suited for a business that usually pays off its card balance in full and is seeking a low cost option for day-to-day business spending. If a business does not use its card very often, it might consider a low fee card. Having a credit cash flow option for the business can be vital, but business owners shouldn’t have to pay an excessive amount for the privilege.

To be included in Canstar’s business credit cards star ratings, the low fee card must have a credit limit of $10,000, available on application. The low fee credit card category includes both business-liability and personal-liability business credit cards.

While, interest rates and fees for business credit cards have barely budged over the past year – only changing slightly due to ANZ’s Visa Business Airpoints Card coming onto the market – there is still a considerable difference between the maximum and minimum rates.

Interest rates across all credit cards in 2017

Summary of Purchase Rate – 2017 vs. 2016
Number of Institutions Number of Products Min* Max* 2017 Average 2016 Average
All Credit Cards 5 12 14.95% 20.95% 19.22% 19.06%
Source: www.canstar.co.nz. Includes all products eligible under Canstar’s Business Credit Cards Star Rating – June 2017. *No change from 2016 Business Credit Card Star Rating – July 2016.

Business credit card interest rates have held steady, but that also means the gap between the minimum and maximum interest rates have not closed at all. In fact, there is a 6% difference between the highest and lowest rate cards on Canstar’s database. When looking at a $10,000 balance, that’s $600, so it is definitely worth weighing up your options before settling on a card.

The annual fee is another business credit card charge you have to take into account when selecting a product. As is the case with the interest rates, there hasn’t been a huge amount of movement in fees, over the past year. So, when you’re doing your comparisons, the real benchmark is looking at the differences between minimum and maximum fees.

Summary of Annual Fee – 2017 vs. 2016
Number of Institutions Number of Products Min* Max* 2017 Average 2016 Average
All Credit Cards 5 12 $25 $145 $77.90 $71.80
Source: www.canstar.co.nz. Includes all products eligible under Canstar’s Business Credit Cards Star Rating – June 2017. *No change from 2016 Business Credit Card Star Rating – July 2016.

Source: Canstar.co.nz

When comparing annual fees, there is a $125 difference between the highest and lowest charge, that’s a lot of money. However, it’s important to check that what you’re saving in annual fees, you’re not losing in credit card benefits that your business would use. Speaking of benefits, business rewards credit cards could mean free flights and cash back for your business, so it’s worth considering. However, proceed with caution if your business does not make many transactions.

Interest rates across all credit cards in 2017

Business Rewards Card

What is it? Rewards business credit cards or charge cards come with a rewards programme attached. The rewards offered may include cash-back, gift cards/shopping vouchers, frequent flyer rewards, merchandise, entertainment or lifestyle rewards – all of which we research and assess in our ratings.

What is it useful for? A rewards card option may be suitable for a business that puts a high volume of transactions on its card each month, and always pays off the balance of its card.

If a business does not use its card very often, then it does not make sense to get a rewards card, because it would end up paying more in annual fees than it would receive back in rewards.

Here’s a breakdown of interest rates and fees, specifically looking at business rewards credit cards:

Interest rates (Difference from 2016) Minimum Maximum Average Number of products Number of Institutions
18.95% (No change) 20.95% (No change) 20.45% (+0.1000%) 9 (+1) 6 (No change)

 

Annual fee (Difference from 2016) Minimum Maximum Average Number of products Number of Institutions
$73 (No change) $145.00 (No change) $112 (+4.13) 9 (+1) 6 (No change)

 

The minimum annual fee for a rewards card is $48 more a year than the minimum fee for all credit cards, according to Canstar’s database. So, to reiterate, rewards credit cards are really there to incentivise business that make a large number of transactions using this card.

Looking specifically at annual fees for rewards credit cards, the maximum annual fee is almost twice as much as the minimum fee – $145.00 for the highest fee, compared with $73 for the lowest. So, while the minimum and maximum rates have not moved an inch in the past year, there is still potential money to be saved, just by doing some research on the products available.

The serious business of choosing a credit card

To recap, there is a wide range of credit card products on the market, for good reason. Obviously, the providers are keen on your business. But each business also has its own way of operating and banking that will impact on the choice of credit card to use. Take some time to think about how your business banks and then compare the fees and charges in that product type. You never know, you may be able to afford that staff shout, after all…

What type of credit card does my business need?

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