Guide to business credit cards

Business credit cards should be chosen carefully, different providers offer perks and benefits that will suit different businesses, so it’s worth spending time researching different offers.

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 Guide to business credit cards

What is a business credit card?

A business credit card is a credit card used by business owners as an additional line of credit for business expenses. The business credit is a revolving credit facility, with a monthly credit limit that can be used for anything that you need to purchase for your business. You simply use the card throughout the month, and pay off the balance in full every month. Business credit cards are ideal if you are in a position to repay the entire loaned amount within the billing period, otherwise, you will incur interest charges and late payment fees. You can also use one to improve your organisation’s credit profile.

How do I apply for a business credit card?

This will depend on the credit card provider, but in most cases you can apply online, or at a branch. You will need to provide the details of your business (trading years, turnover etc) along with some personal details. In many cases, you will get an answer almost instantly, with your physical card arriving in the post within 2-4 working days.

How does a business credit card work?

There is not much difference between a personal and business credit card, other than one being used for your business and the other for yourself. You are also free to give business credit cards to your employees to use for business expenses. This can be a much more convenient way to manage employee expenses, rather than each individual submitting expenses. Of course, that depends on how many employees you have.

Do I need a business credit card?

Most businesses use a business credit card, as they are convenient for day-to-day expenditure. They offer many advantages including the following:

  • Separation of personal and business purchases

  • Businesses can spend despite negative cash flow

  • Improves the administration of employee expenses

  • Makes it easier to spend on business trips abroad

  • It won’t affect your personal credit score 

  • Can choose a card with benefits that suit your business

There are many occasions when a business credit card is more convenient than using bank transfers, a debit card, or cash payment for business expenses. If you are sure that you can clear off any outstanding balance at the end of the month, then a business credit could be a good option for your business.

Who can get a business credit card?

You will be eligible for a business credit card if this sounds like you:

  • You own a small business

  • You are a sole trader, limited company, or a partnership

  • You make business-related purchases for a company you work for

  • You have consistent monthly revenue

Even if you don’t meet the above criteria, there are many lenders who specialise in specific business credit cards, that might match your needs. For example, there are lenders that will expect to see two years of accounts, and others that will demand a minimum monthly revenue of £5,000. This is why it is helpful to use a lending marketplace to quickly identify the best available deals.

How can I find the right credit card for my business?

Depending on your business, and the industry you operate in, different credit cards will suit your needs. Let’s take an example. If you are planning to purchase an item of machinery, and you plan to spread the repayments over many months, a credit card with a low APR (annual percentage rate) could be suitable. In contrast, if it will be used for daily spending, a business credit card with an interest-free period might be a better option. You will have to compare the market, and look at different business credit card offers.

Before you apply for a business card, make a list of ten different providers, and jot down what each of them offers, there are cards with benefits, and for instance, if you fly a lot for business, you can find cards that offer great deals on air miles. You earn airline points doing your normal everyday spending and when you've collected enough, they can be converted into flights. Availability is more limited than when paying for flights with cash, so you'll usually need to be flexible when booking.

If you're looking for a cashback or reward card, something from the American Express range is most likely to suit you best. Check out who offers what in terms of intro bonuses, and ongoing rewards when compared with the rest of the market.

Do I have to pay fees for a business credit card?

You will need to shop around, as many credit cards are free for the first year, and others don’t charge annual fees. However, eventually, you will have to pay fees. Bear in mind that interest rates can vary widely among different providers. Different fees will apply if you withdraw cash or make purchases abroad, and the big one is exceeding your credit limit or missing a repayment. Letting the balance roll from one month into the next is likely to be expensive, when it comes to fees.

What perks can I get with a business credit card?

There are many perks and benefits to using a business credit card. As mentioned earlier there is cash back, where you get a percentage back in actual cash, as a reward for using your card. Other providers offer free insurance, like travel or mobile phone insurance. Others offer discounts at certain retail outlooks. You can also claim a 0% interest deal, and get an interest-free card for a limited time. One of the main rewards is air miles that can be redeemed for flight tickets, or to upgrade to business class.

Is my credit history checked for a business credit card?

Credit card providers will check your business's finances and credit profile when you apply for a business credit card. However, they may also review your personal credit history if you are a sole trader. If you are a business with bad credit, there are specialist lenders that will take a holistic view of your business and will want to see a business plan, and how you have regularly paid off other types of debt. It’s not a bad idea to get a copy of your credit report to see what items you can improve on, otherwise, you won’t get the best deals on a business credit card.

Do I need a business current account to apply?

In most cases, you will not need a business current account to apply for a business credit card. That said, having a business current account will make it easier to monitor your total business spending and to ensure spending limits are not exceeded. You might miss repayments, if your business current account and credit cards are not on the same account, as if you are transferring money from a separate account, it might take a few days to appear on the credit card.

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Thomas Boyd

Thomas Boyd

Head of Commercial

Thomas Boyd is the Head of Commercial at Funding Options. Thomas started his career in the finance sector at LendingCrowd. His work over the past five years has focused on supporting the vibrant and growing community of SMEs across the UK.

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