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How to apply for your first business credit card
A business credit card can help you manage your company finances and boost your credit score. Here’s what you need to know about applying for one.
If you think a business credit card is right for you and your firm, don’t let the application process put you off. Here we explain how to go about getting your chosen card.
What business credit card should you choose?
Many small or fledgling firms recognise the benefits business credit cards offer. Not only do they help keep work and personal finances separate, but they also often come with attractive rewards such as cashback, air miles and discounts on products and services.
Being able to use these benefits to offset future purchases can only be a good thing, but you need to weigh these rewards carefully when you’re starting out. Key questions to ask yourself include:
Which credit card are you likely to qualify for?
If you're looking for your first business credit card, consider getting one for people with little or no business credit history. Often referred to as credit builder, classic or basic credit cards, these can help you build your credit rating. They generally have a relatively low credit limit, which builds over time, and little in the way of perks, but they’re a good starting point.
Which type of card will benefit you the most?
It's important to look for a card with a low annual percentage rate (APR) of interest. This is because even the most prudent boss occasionally needs to spend more than they can afford to pay off at the end of the month.
There are plenty of 0% interest credit cards on the market. With these, you pay nothing in interest for a set period. However, it’s important to clear your balance before the introductory term ends and a higher interest rate kicks in.
If you think you’ll struggle to get a 0% interest credit card because you don’t have a strong business credit history, look for an alternative with a relatively low APR and minimal charges.
How much credit will you need?
Finally, work out how much credit you’re likely to need, allowing a margin for unexpected bills. Make sure your chosen card has a suitable limit.
Read more:
Find the right credit card for your business
How to compare business credit cards
Once you have a clear idea of the type of business credit card you want, you can compare the pros and cons.
Focus on the following:
Interest rates – The APR is only relevant if you don’t pay your balance in full each month. But running a business isn’t always plain sailing, and unexpected outlays can see you fail to clear what you owe. For this reason, look for a card with a 0% interest deal or a comparatively low APR
Annual fees – Some cards come with annual fees, which can cost from £99 to £650. While this can be off-putting initially, you shouldn’t dismiss cards with yearly fees without looking at the overall package. In some cases, the rewards and other benefits far outstrip what you pay to use the card
Rewards – Rewards are one of the main reasons to have a business credit card. Pick the right one and the loyalty points or air miles can save you a tidy sum on future purchases. It’s essential to consider rewards only if you can clear your balance each month – as the interest you pay on an unpaid balance typically costs more than what you earn in rewards
Other fees – Although there are no fees for late payments – that’s when the APR kicks in – providers often charge for cash withdrawals, balance transfers, foreign transactions and exceeding your credit limit
Staff cards – If you have staff who will be making purchases on behalf of the company, it’s worth selecting a card that allows you to issue additional cards to your team. This way, you can potentially earn rewards as they spend
What to do before you apply for a business credit card?
It’s worth running a free credit check on yourself and your business through the three leading credit agencies – Equifax, Experian and TransUnion - to check there’s nothing incorrect on your credit report.
If you spot any errors, ask the agency to correct them. Also, if you have the opportunity, you should carry out a soft credit check (also known as an eligibility check) before applying to get a clearer idea of whether any subsequent application would be successful. Unlike hard credit checks, soft credit checks don’t leave a mark on your credit report, so they won’t affect your credit score.
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How can I increase my chances of getting accepted for a business credit card?
Once you've checked your credit reports, it’s a good idea to ensure you can tick the following boxes before applying for a business credit card:
Confirm all personal and business details are correctly noted on the application form. If you’re in any doubt over what the provider wants, give them a call to clarify before proceeding
Make sure you’re on the electoral roll
Check there are no errors relating to your financial history, such as incorrect County Court Judgments listed under your name.
Take steps to remove financial associates – such as an ex-partner – from your credit file because their financial history can adversely affect your credit score. This could be an issue if you still have a joint account with someone you no longer associate with.
How to prepare for the application?
Once you know what credit card suits you best, the rest is easy providing you follow these steps:
Make sure you have your personal and business details to hand. This includes proof of your age, personal and trading addresses, along with recent accounts to prove your company is operational and registered as a legal entity
Contact your preferred provider via a price comparison site or directly by phone, online or in person.
Read the card’s terms and conditions
What happens next?
The next step is filling in the application form. This should be straightforward, although if you’re unsure about anything call the card provider for clarification. Whatever you do, don’t be tempted to skirt over any awkward details, such as previous debts. Likewise, take time to go through your records rather than rely on memory, mistakes such as these are hard to correct later on.
You usually get a decision on your application immediately, including details of your credit limit and APR. The card provider makes its decision based on several factors, including:
Your credit report
Annual revenue
Estimated monthly card spend
Business duration
If you’re successful and accept the T&Cs, you should receive your card within five working days. At this point, you can set up Direct Debits, online banking and other ways to funnel money into and out of your card account.
If you’re not successful, try to establish why. Typical reasons include:
A mistake on your application, which meant the card provider couldn’t verify your identity
Poor credit history
Links to someone who has a poor credit rating – such as an ex-spouse or ex-business partner