What is a business credit card?
A business credit card is designed to be used by a business rather than an individual. Business credit cards are available to companies of any size and can be used to help build a credit profile as well as manage employees’ expenses.
A business credit card is given in the name of a business instead of a person, though it will also have the name of someone from the company printed on it.
You’re still able to make purchases as you would with a normal credit card, and some business credit cards also offer extra benefits like cashback and insurance deals.
Applying for a business credit card is a slightly different process than applying for a personal credit card. And because they’re designed for companies and not consumers, they aren’t covered by the Consumer Credit Act.
How do business credit cards work?
Business credit cards work a lot like a personal credit card. They provide companies with easy access to a line of credit up to a set limit. Business credit cards can be used to make purchases and withdraw cash, and can help a company manage cashflow.
Businesses can avoid paying interest if they repay the debt on the card in full each month. If this isn’t possible, you will need to make at least the minimum monthly repayment – how much this will be is printed on your credit card statement.
The interest you pay on your business credit card is sometimes based on the type of business transactions you make with your card. You should read the provider’s policy documents before applying for a card so you’re aware of how much interest will be charged and when.
Who are business credit cards for?
A business credit card might be used for a range of situations by the following:
- An employee of a company
- A sole trader
- A business owner or director
Some credit card companies offer different deals depending on the size and financial strength of a business, and some banks may only offer credit cards if you open a business account with them. Business credit cards are a good way to separate your business expenditure from your personal expenditure.
How much do business credit cards cost?
The main costs of a business credit card are as follows:
- Annual fee: Not all business credit cards charge an annual fee, but it’s more common than with personal credit cards. Some business credit cards might be fee-free for the first year, then start charging a fee
- Interest: You’ll pay interest on your balance if you don’t repay your credit card in full each month
There may also be charges for things like:
- Late payments: If you’re late paying your credit card bill, you’ll be charged a late payment penalty
- Exceeding your credit limit: You’ll also be charged a penalty fee if you go over your credit limit
- Inactivity fees: Some business credit cards may charge dormancy or inactivity fees – often a certain amount for every month or year you don’t use the card
- Cash withdrawals: If you withdraw cash from an ATM, your credit card provider may charge an extra fee for this, and immediately charge interest on the amount withdrawn
- Foreign transactions: There are likely to be extra charges for using your business credit card abroad
What perks do business credit cards offer?
Different types of business credit card offer different benefits. These might include:
- Cashback: This is when a proportion of your spend is returned to your card as cash
- Shopping discounts: Some business credit cards offer discounts or vouchers for shopping in certain stores
- Rewards: A business credit card might offer reward points (which can be exchanged for cash or vouchers) or air miles which can be spent on flights or other travel-related purchases
- Insurance: Some business credit cards offer travel insurance as a free perk
- 0% interest on purchases: Some credit cards offer zero interest on purchases for a set period of time, normally between three and 30 months
Why choose a business credit card?
A business credit card can help you establish a separate credit history for your business. Small businesses and start-ups often get turned down for loans because they lack a credit history – so a business credit card can help. There are other good reasons:
- Reduced expenses admin: Employees buying things on a company credit card can help the company manage expenses
- Controlled cashflow: Business credit cards offer a revolving line of credit. You normally have up to 56 days before interest is charged, so this can help with cashflow
- Separate finances: A business credit card can separate personal and business spending
What you need to know before applying for a business credit card
- No consumer credit protection: Purchases for goods worth between £100 and £30,000 on a personal credit card are protected by Section 75 of the Consumer Credit Act. This means if something goes wrong during the transaction – for example, the items aren’t delivered or they don’t work – you’ll be compensated by the credit card provider. This doesn’t apply to business credit cards
- Stringent checks: Start-ups and new companies without a credit rating might not be able to take out a business credit account. If your application is accepted, you might be a given a higher interest rate or a lower credit limit than you expected
- Annual fees: Annual fees are more common on business credit cards than personal credit cards
- The APR: The APR, or annual percentage rate, takes into account interest charged on the card and any annual fee. APRs offer a useful way to compare business credit cards
- Accepted payments: Some suppliers may not accept credit card payments, preferring debit cards or bank transfers instead
How to choose a credit card for your business
Consider the following factors when picking a business credit card:
- The APR: The APR takes into account interest charged on the card plus any fees (such as an annual fee), and is a handy way to compare different credit card deals. However, an advertised APR only has to be legally offered to 51% of applicants, so you might be offered a different APR to that advertised
- Rewards: Look for a business credit card offering rewards you use. For example, if your staff regularly travel overseas, then travel-related perks will be best. If you spend a lot at a certain retailer, a discount at the retailer in question might save you money
- Cards for employees: If you have staff with expense accounts, it may be beneficial for each of them to have a company credit card so look for a credit card company who can arrange this
- Foreign transaction fees: If you or your employees travel frequently, it’s worth checking whether a business credit card charges extra for making transactions abroad
*Please note that MoneySuperMarket does not offer business credit cards.