Business credit cards can reduce borrowing capacity
Business credit cards are marketed as powerful tools for self-employed professionals.
They promise convenience, points, and short-term cashflow support. But when it comes time to borrow for a major purchase—like property or business investment—they can reduce your borrowing capacity.
Here’s the reality most lenders won’t advertise.
1. Business Cards Reduce Your Borrowing Capacity
Even if a credit card is in your business name, it still impacts your personal borrowing power. Most lenders treat the credit limit as a liability, not just the amount owing.
According to Flexdoc Founder Peter Esho, "...a $20,000 limit can reduce your borrowing capacity by as much as $80,000. It doesn’t matter if you pay it off every month. Lenders assess the worst-case scenario: full limit used, minimum repayment due..."
This becomes a real problem when you're applying for a loan to buy or refinance property. Every dollar of borrowing capacity counts, especially if you're self-employed and already facing tighter scrutiny.
2. Points Are Overrated
Yes, rewards points sound great. Flights, upgrades, gadgets. But you need to spend big to earn anything meaningful. And most self-employed borrowers are better off focusing on cashflow efficiency, not chasing perks.
Many cards also come with high annual fees, surcharges for certain payments, and complex rules. If you're paying $300 a year in fees to chase a $200 flight voucher, the numbers don’t stack up.
3. The Fees and Interest Add Up
Business credit cards often charge higher interest rates than personal cards. If you don’t pay the full balance on time, you're hit hard. And even if you do, the opportunity cost of carrying extra liabilities can weaken your loan profile.
For some, it makes more sense to consolidate expenses under a single business account and use a debit facility. You’ll avoid the temptation of spending beyond your means and keep your financials cleaner when it’s time to lodge your loan application.
The Verdict
So are business cards worth reducing your borrowing capacity?
For many self-employed borrowers, business credit cards do more harm than good. Charge cards are treated differently among each lender.
Cards might be useful for short-term cashflow gaps or tracking expenses, but they should be used with caution. If your goal is to build wealth through property or scale your business with smart debt, it's worth reviewing how every financial product impacts your borrowing power.
Before applying for a credit card, ask yourself: do I need this, or do I just want the perks? And when it's time to get a loan, don’t be surprised if that flashy card becomes a silent killer in your application.
Better funding starts with cleaner, leaner finances. Choose wisely.