Compare Business Credit Cards

Business credit cards explained

What is a business credit card?

A business credit card can be a convenient way to purchase items for your business and to pay for a range of expenses. For example, you could use a business credit card to pay for office supplies and equipment, entertainment and any travel and accommodation costs.

These cards can also help you to manage your business finances and cover any short-term gaps in your cashflow if you’re waiting for invoices to be paid, for example.

How do business credit cards work?

As with personal credit cards, business credit cards allow you to borrow money over a short period and pay it back at a later date. They come with a credit limit, which is the maximum sum you can borrow on the card, and may offer additional perks such as a cashback or reward scheme.

It’s possible to issue credit cards to employees (and set spending limits on them), which can help a business keep track of its expenses.

Business credit cards typically come with an interest-free period, which is usually around 56 days. Some cards offer longer introductory 0% periods, which may not charge any interest for several months.

However long the interest-free period is, your business should aim to pay off the balance in full before interest charges apply. But, at the very least, your business needs to make the minimum payment each month, otherwise extra fees may apply and your business credit history could be affected.

Businesses that operate internationally or have members of staff that need to travel abroad can look for a business credit card with reduced foreign exchange fees.

Should I have a business credit card?

It’s up to you and your individual business requirements as to whether you have a business credit card.

A business credit card can offer several benefits as:

• you can use an interest-free period to help manage your cashflow
• it’s easy to track spending and review business expenses
• it can act as a back-up option if you need to cover an unexpected emergency expense
• you can separate personal and business costs for easier accounting
• it’s a convenient way to purchase goods for your business, online and in-store
• it’s easy, and potentially cheaper, for spending abroad
• you can start to build the credit score of your business
• you may benefit from cashback or other rewards, such as points or air miles.

However, it’s important to remember that interest rates on business credit cards can be high and they may come with annual fees, so make sure to calculate any costs before applying.

Furthermore, a business credit card is only suitable if you don’t borrow more than you can afford to repay, otherwise you risk harming your business credit score and creating more serious consequences for your business.

Can I use a personal credit card for business?

While you could theoretically use a personal credit card for your business spending, mixing your personal and business finances generally isn’t recommended.

It’s easier to track your business expenditure and complete your accounts if you keep your business finances separate from your personal accounts.

Furthermore, if you use a personal credit card for your business spending, your personal credit history will be affected and you will be personally liable for repaying the debt.

What fees and charges should I expect with a business credit card?

Business credit cards may come with the following fees and charges:

• Card fee. Some credit cards charge an annual or monthly maintenance fee as standard. This may be waived if you meet certain terms (such as spending a minimum sum).
• Interest. Unless you pay off your business credit before charges apply, you will need to pay interest on the amount you borrow.
• Cash advances or withdrawals. Many providers charge a percentage or fixed fee for using a credit card to withdraw cash.
• Foreign transaction fees. While some credit cards offer fee-free spending abroad, others may apply additional fees for spending in a foreign country or currency.
• Additional cardholder fees. Depending on the provider, you may need to pay a fee if you have more than one card linked to your account.
  In addition to the standard fees and charges that a business credit card comes with, providers may also charge penalty fees for late or missed payments or for going over your credit limit, for example.

How do I apply for a business credit card?

Before applying for a card, it’s a good idea to compare business credit cards on our chart above. The key things to look at are each card’s annual percentage rate (APR), annual fee, any cashback or rewards, associated fees and introductory 0% deals.

You should also check the eligibility criteria as some cards require you to be an existing business banking customer with the brand, while some cards are only available to certain business types. They may also set minimum annual turnover requirements.

As a rule, most business credit card providers require applicants to be UK residents over the age of 18 with a UK-registered business.

Once you’ve chosen a suitable business credit card, you can typically apply online, over the phone or in branch.

You will need to answer some questions about your business, including:

• its turnover (or expected turnover)
• details of the owners and directors of your business (including address history)
• your business address and Companies House registration number (if applicable)
• your business bank account details.

You may also need to provide certain documents, including proof of identification and copies of bank statements and related financial information, such as tax statements.

Once you’ve applied, the lender will perform a credit check on your business, and sometimes a personal credit check too.

If approved, you’ll usually receive your new card(s) after several working days.

Some providers allow you to check your eligibility for a business credit card before applying, without affecting your credit score.

How to get a business credit card for a new business

The application process for a business credit card will be largely the same whether you’re a new business or a more established one.

However, as a new business, you may not have much, if any, evidence of turnover, cashflow or trading history to support your application. This means you may have to provide additional information, such as bank statements, forecasts and maybe even a business plan.

The card provider will also run a check on your business credit history. But, because a new business may not have built up its own credit score yet, providers may take a closer look at your personal credit history to help them make a decision on your application.

Providers may ask newer businesses to provide a personal guarantee on their credit card, which states that you’ll be personally liable for any debts should your business default on the repayments. This may not always be necessary, and may be required even if you’re an established company, but it’s worth bearing in mind if you’re a new business.

Can I get a business credit card with bad credit?

It’s possible to get a business credit card for bad credit, but the choice of options is likely to be more limited than if your business has a long history of good credit.

Moreover, the cards that you are eligible for are likely to come with a higher interest rate and lower credit limit, while additional features such as reward schemes may be limited or non-existent. You’re also more likely to be asked for a personal guarantee to minimise the risk to the card provider.

Before applying for a business credit card, it’s worth seeing if you can check your eligibility to find out your chances of approval. This won’t involve a hard credit check so won’t affect your credit score.

Don’t make the mistake of applying for a lot of cards in a short period as multiple hard credit checks in a short period could have a negative impact on your credit history. Try to only apply for a single business credit card that you’re confident you’ll be approved for.

Do business credit cards build credit?

Yes. Much like with a personal credit card, by effectively managing your business credit card you can start to build the credit score of your business. This could help you secure additional finance in the future at more competitive interest rates, for example, to help your company invest and grow.

To improve your business credit rating, it’s crucial to keep to the terms of your credit agreement, including not going over your credit limit and never missing a repayment. If you were to fall behind on payments, for example, a business credit card could harm your credit score and cause it to drop, instead of improving it.

Does a business credit card affect your personal credit score?

Some providers may only run a soft personal credit check when you apply for a business credit card, which won’t be recorded on your credit file. But, in some cases, particularly for newer businesses, providers may run a hard credit check on your personal credit report, which could affect your score.

However, provided you manage your credit agreements effectively and don’t make any further applications for credit within the next few months, this impact should be minimal.

In general, the only other time a business credit card could affect your personal credit score is if you give a personal guarantee. This would mean that, if your business defaults on the credit card debt, you would be personally liable to repay it.

What are the biggest mistakes people make with business credit cards?

While business credit cards have their perks, it’s important to avoid making the following mistakes. Otherwise, the potential damage a credit card can cause could outweigh the benefits it offers.

• Overspending. A major risk of credit cards is that they can tempt you to overspend, especially if you spend more to earn more rewards. This can then lead to a business building up expensive debt that it can’t afford to pay off.
• Not paying off your card balance before interest charges apply. When you spend with a business credit card, ideally you should aim to clear your balance in full each billing period to avoid paying interest. While this may not be possible all the time, it’s important to keep your debt under control and pay off as much as you can each month.
• Not maximising the rewards on offer. When taking out a credit card, make sure you know all the benefits it comes with and what you need to do to earn any rewards. This will allow you to plan your spending, for example, to make the most of all the advantages available.
• Not reading the terms of the credit card. When you apply for a credit card, it’s important to read through the terms and conditions, including the fees that may be charged, so you can manage your card more effectively.
• Missing payments or going over the credit limit. This is likely to result in penalty charges and could affect your credit history.

What are the best alternatives to a business credit card?

Instead of a business credit card, there are other finance options that could be suitable for your business, such as:

• business loans
• invoice finance
• asset finance
• lines of credit
• commercial bridging loans.