How to choose a business credit card

Business credit cards can be a valuable tool for short-term borrowing. They let you buy things for your business on credit and pay the money back at a later date.

What types of business credit cards are there?

As with personal credit cards, there are different types of business credit cards. Which is right for you depends on what you want to use it for and how you plan to spend on it. It may be worth getting different credit cards for different purposes.

These are the main types:

• 0% on purchases credit cards – these let you make purchases with the card and pay no interest on your spending for an introductory period - e.g. six months

• Cashback credit cards – these give you cashback on purchases, such as 1% of your spending

• Reward credit cards – these give you other rewards, such as points to spend at certain retailers or Avios points that you can put towards the cost of holidays or other forms of travel

• Travel credit cards – as well as giving you points, some cards come with other travel perks, such as access to airport lounges and travel insurance

• Low-interest credit cards – if you won’t be paying off your credit card in full each month, you should choose a card with a low interest rate to keep your borrowing costs to a minimum. Purchase interest rates typically range from 15% to 30% for a business credit card, although some charge more.

Business credit card fees

It’s important to compare business credit card fees when choosing one. Most have an annual fee – typically around £28 to £150 (or more) – although some don’t charge for this in the first year. 

Other fees to watch out for include:

• Fees for late payments and exceeding your credit limit – credit card providers can’t charge you more than £12 for these

• Balance transfer fees – if the card lets you transfer a balance from another credit card, you could pay 3% of the amount as a fee

• Cash withdrawal fees – if you use your card to take out cash from an ATM, you may have to pay 2.5% to 3% of the transaction. Worse, providers also tend to charge interest on any withdrawals from day one

• Foreign usage fees – most cards charge a fee when you use them abroad. These range from 0.99% of the transaction amount to 2.99%. There are cards with no foreign usage fees, while others don’t charge when you use them in the EU, so choose one of these if you plan to use the card abroad

Other factors when choosing a business credit card

Cards have eligibility criteria you need to meet to apply for one. For example, your business must typically be based in the UK and have a turnover over a certain amount. 

Your business credit score affects whether a provider will grant you a credit card and the credit limit it offers. It’s worth checking your business credit report before you apply for a card to find out your score and see whether there’s anything you can do to improve it.

Use credit card eligibility checkers online to see which cards you’re likely to get before applying. This reduces your chances of being turned down for a card and ending up with multiple searches on your credit report, which can harm your credit score.

Read our How to apply for a business credit card guide to learn more.

Bear in mind that while using a business credit card can boost your business credit score, it can also damage it if you don’t pay your credit card bills on time.

What can you use a business credit card for?

You can use a business credit card for anything you need to pay for in your business, such as:

• Equipment

• Office supplies

• Business travel

• Invoices

• Expenses

• Entertaining clients

• Software

• Utility bills

• Advertising

Using a business credit card can also help you manage cash flow. It also keeps your business and personal finances separate.

Credit cards are useful for making relatively small payments, especially if you pay your bill in full each month so you don’t pay interest on your spending. However, if you need to purchase more expensive items over a longer period, using another type of business finance, such as a business loan or invoice finance, could be cheaper. 

Bear in mind that you can only spend up to your card limit.

Can you use a personal credit card for business?

While you can use a personal credit card for business if you’re a sole trader, it’s not a good idea. This is because if you use a personal credit card for business:

• It won’t help you build up your business credit score

• It makes it harder to track your business spending and tax-deductible expenses

On the other hand, if you have a limited company, you have no choice - you must keep your personal and business finances separate. 

Find out more about using a personal credit card for business.

Advantages of business credit cards

Using your personal credit card for business expenses might be convenient, especially if you’re just starting out. However, using a business credit card offers several benefits. 

For instance, you can get extra cards for your employees on the same account. This helps you track and control their spending. It also makes paying for their expenses easier as they don’t have to claim them back, and you can pay off all the cards at once.

Business credit cards often provide perks and rewards that are specifically designed for businesses, too. These include free accounting software or discounts on business travel. You can also integrate them with your accounting software to easily add your credit card spending to your accounts.

Read more …

• What is a business credit card?

• How to apply for a business credit card

• Can you use a personal credit card for business?

• Should you get a business credit card or business loan?