Business credit cards offer practical benefits that appeal to – and in many cases are extremely helpful to – business owners. But with a wide variety of business credit cards and charge cards available in the UK, it may seem overwhelming to find the right card for you and your business.
We’ll break down everything you need to know before choosing a business credit card. Let’s get into it.
Things to consider when comparing business credit cards:
- Rewards opportunity: If possible, travel rewards or cash back just for using your company card are great benefits for businesses.
- Fees: Typically you want to keep fees as low as possible, but there are times when they can unlock great features. Evaluate if and when this makes sense for your business.
- Introductory perks: Some business credit cards will offer perks like introductory interest-free periods or sign-up bonuses that sweeten the deal. It can be especially beneficial to look for cards that offer a 0% APR intro period if you have major business expenses coming up.
- Extra bonuses: If all else is equal, look at extra bonuses company cards may offer like travel insurance, purchase protection, ability to add supplementary cards, and more.
With these factors in mind, you’re ready to start looking for the best business credit card for you.
Should I get a business credit card?
There are many reasons to get a business credit card, and these are equally important whether you’re a sole trader or a company director.
A business credit card can:
- Help your business’s credit score: Often, smaller firms and start-ups find it difficult to get loans because they lack a credit history. The right business credit card can help build your business’s credit score, allowing you to secure loans and at better rates.
- Control budgets: With a business credit card, you’ll usually have around 56 days before they charge, which can assist with your company cashflow.
- Cut down on administration: Having your employees use a business credit card can make managing expenses far easier. With a company credit card, all outgoings are listed in one account, rather than ending up with a string of individual expense claims.
- Keep your finances separate: Separating your personal and business outgoings can simplify your accounting – a business credit card is an easy way to achieve this separation.
If any of these sound helpful to you and your business, you should consider getting a business credit card.
What is a business credit card?
A business credit card can help you manage business cash flow, spread the cost of pricey items or keep an orderly record of your expenses. Top that off with the fact that some offer the opportunity to earn rewards or cashback on all of your business spending.
How do business credit cards work?
The basic functions of a business credit card are similar to personal credit. That is, you use the card to pay for purchases and then pay off all or part of your balance at the end of the month (and carry any remainder as debt). But the added benefits of business credit cards can make them a very useful tool for businesses of all types.
Types of business credit cards
As with regular credit cards, there are several different types of business credit cards. However, we can bucket the main types into three categories:
Rewards business credit cards
When searching business credit cards, you’ll find that some offer a rewards system such as spending perks or cash back. Some of these cards charge a fee, although many offer the system for free for a short time. If they charge fees at all, though, weigh up the benefits of the rewards with the money you’ll have to pay.
Balance transfer business credit cards
There are many credit cards onto which you can shift your existing business debt, but balance transfers are especially useful when it offers 0% or low interest for a period of time, often six or twelve months. There aren’t many purpose-made balance transfer business credit cards on the market.
0% purchase business credit cards
Purchase business credit cards are those which allow you to spend for a certain time – perhaps three months or more – without charging you interest. This break in interest charges could help with your firm’s cashflow, but you will still need to keep up with minimum monthly repayments on the credit card.
Business charge cards
A business charge card requires you to clear your entire balance every month – you cannot actually borrow money on it. You will never see an APR quoted on a charge card, because there isn’t one. The provider does not make money from charging interest. Instead, it is more likely to impose a monthly or annual fee.
Charge cards have two major advantages over a business credit card. First, you can use them to make major purchases without worrying about exceeding your credit limit. Second, they typically offer more freebies or rewards, such as travel cover, vouchers, motor breakdown, cashback, airport lounge access and concierge services.
Who can get a credit card for business?
Business credit cards are available to sole traders, start-ups and those spending money or buying items for a larger company.
Advantages and disadvantages of company credit cards
There are both pros and cons of business credit cards. They include:
Advantages:
- Convenience – credit cards are quicker and simpler than cheques. You can also use them online or over the phone, making them far more useful than most other payment methods.
- Interest-free credit – depending on the issuer, business credit cards often offer 56 days interest-free. And of course, you don’t have to worry about interest at all if you clear the entire balance in full every month.
- Travel perks – most credit cards are internationally recognised and accepted, so using your company credit card for foreign travel purchases may be cheaper with better exchange rates.
- Ability to set spending limits – with most business card accounts, you can control which of your employees has access and set credit limits to each card accordingly.
- Easier admin – when using a credit card for your business, you will only have one bill to settle each month, rather than multiple smaller purchase expenses.
- Contactless payments – contactless cards have made our lives even simpler, especially in a pandemic. Most cards have contactless payment options that can be used for purchases up to £100.
Disadvantages:
- Lack of total control of spending – while you can decide on credit limits for each of your company credit cards, you are still handing employees the chance to spend your business money without overall control.
- Opportunity to run up debt – credit cards are easy to use. This coupled with the delay between transactions and paying your bill, there’s a risk that you could overspend and mount an unaffordable debt. Also, if you don’t pay your statement balance in full each month, interest may accrue and can easily get out of hand.
- Potential fraud – if your credit card details are found or exposed, you may find large fraudulent purchases on your card statement.
- Personal credit risks – Some business credit cards require a personal guarantee, meaning your own personal credit is used to help you qualify. This can cause harm to your personal credit if you aren’t able to pay back business expenses.
What perks do you get with a business credit card?
Business credit cards also offer freebies and special deals. Though these perks are usually not as generous as those on personal credit cards.
Still, they’re worth looking out for. Some cards have zero overseas usage charges, enhanced travel insurance benefits or Avios air miles. All of these could tempt those who travel overseas regularly for business. One or two offer 1% cashback on spending. Or waive fees for transferring a balance from an existing card.
A word of warning though. Cards with extras often have higher APRs or high annual fees. So make sure they are worth the cost.
What does a business credit card cost?
Brits often don’t realise how lucky we are when it comes to personal credit cards, as most do not charge an annual fee. This is not the case with business credit cards. Many business cards charge from £30 to £199 a year, or more. Important to consider, particularly if you’re looking for credit cards for small businesses.
Annual fees may be waived for an introductory period, such as three or 12 months, but always check the long-term cost. Note that in exchange for higher annual fees on a business card, you can sometimes score some pretty mouth-watering perks. However, make sure that the value of the benefits outweigh the annual cost before shelling out for it.
APRs are typically slightly higher for business cards too. This can mean ranging between 22% and 25%, while one or two charge up to 40%. However, we have found long-term APRs as low as 13% to 16%. A higher APR does not matter so much if you plan to clear your credit card on time and in full every month, and are confident you have the discipline to stick to that. However, your handy piece of business plastic could cost you dear if you don’t.
How to compare business credit cards
Comparing business credit cards may feel overwhelming. When choosing which is best for you, consider the following factors:
1. Determine why your business needs a credit card.
Your answer to this question will help you decide which card to apply for. Here are a few reasons you might want a credit card and some matching card types:
- If you travel a lot for work, look for business credit cards that offer airline or hotel rewards.
- If you’d like to build a credit profile for your business, a card with low APR and no yearly fees might be best.
- If you’re looking to make a business balance transfer, search for cards that offer 0% or no-fee balance transfers.
2. Evaluate extra perks available to you.
A perk of a credit card can be collecting rewards while carrying out your usual business spending. Some cards offer cash back based on your spending, while others offer reward points for every pound your company spends you spend. Knowing what will be most useful to you will help in comparing credit cards.
3. Compare relevant fees.
Charges and fees are important when comparing company credit cards. Carefully weigh up the amount you’ll have to spare against the other benefits of a particular card. Typically you want to keep fees as low as possible, but there are times when they can unlock great features.
Can you use a personal credit card for business?
As a rule, you can indeed use a personal credit card for business. If you’re the only person in your firm who needs a credit card and your transactions are likely to be relatively small, you can use your personal credit card for business expenses. However, if multiple people need access or if you’re like to make bigger purchases, a business credit card may be more appropriate.
Do company cards affect my personal credit score?
Your company card can impact your personal credit. It depends on several factors such as the card type and how it’s used. If you have a small business and are the primary account holder of the credit card, your card management will impact your credit. On the other hand, if your business is large and you use one of its several company cards, it’s likely that the business’s credit score will be impacted rather than yours.
How to get a business credit card
Here’s what you’ll need to do in order to get a business credit card:
1. Find the best business credit card for you.
To get a business credit card in the UK, the first step is, of course, to find the card that’s right for you and your business.
2. Make sure you’re eligible for the card.
Once you believe you’ve found the best business credit card for you, you’ll want to make sure you meet the requirements for that card.
You must typically be 18 years old or older with a UK-registered business. Sole traders, start-ups and larger businesses can all get cards, although they may be offered different deals. Your turnover might be the deciding factor here. With some deals you will also have to sign up to the provider’s current account to qualify, so check that also meets your needs.
The financial strength of your business and its credit profile will also determine which card you can get, and the APR you pay. Even if your business is accepted it may not qualify for the headline APR, as card providers are only obliged to give the advertised rate to 51% of applicants. You could pay more.
3. Apply for the card.
If you meet eligibility requirements, then it’s time to gather together details you’ll need to apply. Online applications are the order of the day, although some providers will also let you apply over the phone or by post.
Assemble all relevant information beforehand, which might include your company name, contact details, income and turnover, when your business started, how many employees you have, and so on. If you plan to have additional cardholders, information about those cardholders may also speed things along.
What don’t I get on a credit card for business?
Here’s a bit of bad news. Those juicy 0% introductory rates you find on balance transfers and purchases are rare on business credit cards in the UK.
One or two cards do charge zero interest on purchases for the first six months, while several offer 0% purchases at specified builders’ merchants, aimed at those in the trade. But if you fancy a corporate credit card charging zero interest on balance transfers or purchases for the first two or three years, you may be disappointed.
In addition, personal credit cards give you protection under Section 75 of the Consumer Credit Act 1974, for spending between £100 and £30,000. Sadly, this does not extend to company credit cards, although some cards may offer their own fraud protection scheme. Because of the lack of cover under Section 75, the latter is a more important benefit to look out for in business cards.
Is a business credit card right for you?
If you have a business, then there’s a good chance that a business credit card (or charge card) could be useful to you. Particularly if you’re a sole trader or smaller business, a business card can be a good way to separate your business and personal expenses. Consider it good financial hygiene.
In addition, spending on a business card can help you track and manage expenses for your business and even provide short-term revolving credit in cases where you have short-term gaps in inflows and outflows. Corporate credit cards also may have rewards attached, which is a nice bonus on spending that your business would have done anyway.
Do keep in mind that a business credit card is not a particularly good way to borrow for your business. If what you’re after is funding for your business, then you probably should be looking into loans rather than credit cards. Credit card borrowing costs are particularly high.
Learn more
- What is a business credit card?
- What’s the difference between business and personal credit cards?
- Are business credit cards personally guaranteed?
Frequently Asked Questions
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Not necessarily. If your business credit, turnover and assets are strong enough, the bank may not require a personal guarantee. If the credit limit on the card is low, there may also be no personal-guarantee required.
However, in a lot of cases, banks will require that you sign a personal guarantee for your corporate credit card. In this case, you will be personally liable for the debt incurred on your credit card account.
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In cases where you sign a personal guarantee for your business credit card, yes, your business card can affect your personal credit. If you miss payments or otherwise don't stay on track with your business card, that may drag down your personal credit score. Note that this isn't necessarily the case, it depends on how the card issuer reports these issues. Nevertheless, this is a good reason to be as smart with your company credit card as with your personal card. Don't spend above your (business's) means and do pay your bills on time.
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If your business card carries an annual fee -- as business cards often do -- that fee may indeed be tax deductible. Other fees, such as interest charged on outstanding balances, may also be deductible. In short, these may be allowable expenses, but it's wise to check with your tax advisor if you're in doubt.
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Most business credit cards can be used abroad, but it can be expensive. Check for travel fees like non-sterling transaction fees before you use it abroad. You can check out travel credit cards for other options of cards that are best to travel with.
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While personal credit cards give you protection under Section 75 of the Consumer Credit Act 1974, this does not extend to company credit cards. However, some business credit cards may offer their own fraud protection scheme. Because of the lack of cover under Section 75, the latter is a more important benefit to prioritize in business cards.
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Yes, you can get multiple cards for the same account, so several employees could have their own card.
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Business credit cards are designed for purchases required to run a business. They can be used to purchase laptops, stationery, office furniture, and more.
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While you do need a business to apply for a business credit card, the criteria for being a business may be lower than you expect. If you sell goods or services, are a freelance writer or teach football, for example, you could be deemed a business owner. Do bear in mind that it’s very important to be honest on all credit card applications.