If you run a company, then a business credit card could be useful to pay for business expenses and help manage your cash flow.
Managed carefully, business credit cards could be an asset to your company.
You can use them to pay for essential costs, goods or services for the business as required. And issuing cards to responsible employees could help you easily keep track of and process their expenses, too.
They can also help build a good credit profile for your business, you could even get perks and rewards for spending on them.
A business credit card, also known as a company credit card, is just like a normal credit card, but it’s in the name of your business rather than an individual. And it’s there to finance your business, rather than personal expenses.
Any size business can have one, even a sole trader or self-employed freelancer. If you have a larger company, you can also assign cards to your employees to use for their expenses.
In most respects, they work in the same way as personal credit cards, allowing you to borrow money up to a specific limit set by the lender.
You’re required to make minimum monthly repayments. However, if you pay back the total amount you’ve borrowed each month, you pay no interest. Pay back just part of the balance, and you’ll be charged interest on the remaining amount you owe.
Business credit cards usually come with higher spending limits than personal credit cards. And lenders often offer more lucrative rewards and benefits like travel perks.
Most company credit card lenders can provide multiple cards, so you can issue them to your employees to use for their expenses.
There’s usually an annual fee to pay on a business credit card, though this may be waived for the first year of use.
You should do a little research before deciding on which sort of credit card would suit your business. Cards available may include:
These cards come with a low or 0% introductory interest rate on purchases. They can be useful if you’re looking to make big purchases for your business, giving you more time to pay them off.
After the introductory period ends, you’ll be moved to a higher interest rate. Think about clearing the debt before this happens to avoid paying out more than you need to.
These cards earn you rewards or a percentage cashback on your credit card spending. They usually charge a higher rate of interest, so they’re best suited to businesses that spend a lot on their credit card but pay back the balance in full every month.
These cards don’t charge foreign transaction fees, so if you do a lot of business travel abroad, they can be a cost-effective option. You need to watch out for other types of charges though, for instance if you use an ATM.
If you’re thinking about applying for a business credit card, consider:
It’s always important to look at the drawbacks of a credit card before applying:
You can apply for a card from your preferred lender either online, at its local branch, or on the phone. Bear in mind that some card providers require you to be an existing business account holder with them, but it’s not always the case.
You’ll need to provide information on your business, including its turnover (or its estimated turnover if you’re a new business), and the lender will run a credit check on the business, and sometimes a personal credit check too.
Depending on the results of the check, you’ll either be accepted or approved. If you have a strong credit profile, you’ll usually be offered a better interest rate and credit limit.
Yes, but many small business owners prefer to keep their personal and business finances separate, so they can keep track of company spending more easily.
Business cards also often offer higher spending limits which might suit your business better, plus more lucrative rewards.
Also, of course, using a personal credit card to finance your business won’t help build your business credit profile. So, you’re less likely to be accepted for other forms of credit in the future, like loans.
Be aware that if you’re the primary account holder of a business credit card, any missed payments can negatively affect your personal credit score.
As well as paying interest on unpaid balances on your company credit card, you could be charged:
You should compare a range of credit cards, factoring in things like:
Businesses of any size can get a credit card, but start-ups may find it more difficult to be accepted for a card as they won’t have a credit history.
Your company will be credit checked so that the provider can decide whether to offer you a card and what your credit limit will be.
It might also ask to see bank statements and details of company assets to make sure you can afford the repayments.
Some lenders will look at your personal credit score to help them decide if they can offer you a business credit card. If your score is good, they may be more likely to approve your application.
As a new business, you might be given a low credit limit or a high interest rate while you build up a credit record. But if you manage your credit card well and make payments on time, you’ll be able to apply for more competitive business credit card deals in the future.
If you’re a new business, they can help you build up your credit rating, as long as payments are made on time and you stay within the credit limit.
As the main account holder on a business credit card, you’re usually liable for all debt on the card. That means that late or missed payments can have a negative impact on your credit record and you could struggle to get personal credit as a result.
It’s possible to get approved for a business credit card even if you have a poor credit history. You’ll likely be charged a high interest rate and have a smaller credit limit, though, so you should be confident you can pay off your card’s balance in full every month. Using the card wisely and responsibly can help rebuild your credit score.
Yes, a business credit card can be used by anyone who runs a business, whether it’s a sole trader or a limited company. As long as you meet the eligibility criteria, you can take one out.
If you run a business and authorise employee expenses, then you can keep track of their spending more easily.
You’ll need to meet the lender’s criteria, which could include:
Business credit cards are for companies that are small to mid-sized, including sole traders. Corporate credit cards are designed for large companies with much bigger annual revenues and multiple employees.