Whether you’re an entrepreneur in the startup phase or a seasoned MD, managing cash flow effectively is a key business skill. One tool that can aid you in this regard is a business credit card.

But what exactly are business credit cards? How do they work? And more importantly, how can you choose the right one for your business situation? My guide aims to answer all these questions and more.

Guide to Business Credit Cards illustration

What is a Business Credit Card?

A business credit card, much like a personal credit card, is a revolving line of credit. However, as the name suggests, it is specifically designed for business use.

At its core, a business credit card allows you to borrow money up to a certain limit. Like a personal credit card, you’ll be expected to pay back what you’ve borrowed, either in full or partially, at the end of each billing cycle, with interest charged on any outstanding balances.

However, business credit cards come with several features and benefits that are particularly useful for businesses. For instance, they often offer higher credit limits than personal cards to accommodate larger business expenses. Many also come with rewards programs that provide points or cash back for spending in certain categories, such as travel, office supplies, or advertising. These rewards can be reinvested into the business, making them a potentially profitable financial tool.

Another notable feature of business credit cards is the expense management tools they provide. These can include detailed monthly and annual reports, integration with accounting software, and even the ability to issue employee cards with customizable spending limits.

Lastly, using a business credit card can help build your business credit history, which can be beneficial when applying for business loans or additional lines of credit in the future. Businesses can demonstrate financial responsibility and increase their creditworthiness by making regular payments on time and managing the card responsibly.

Different Types of Business Credit Cards

Here are some of the most common types of business credit cards:

Type Description
Business Rewards Credit CardsThese cards offer rewards for business-related spending in the form of cashback, points, or miles. The rewards can be redeemed for various benefits like travel, merchandise, gift cards, or statement credits. Ideal for businesses with high spending in categories that align with the rewards program.
Business Travel Credit CardsIdeal for businesses with significant travel expenses, these cards offer benefits like airline miles, hotel points, access to airport lounges, travel insurance, and more. They may also have no foreign transaction fees, making them a good choice for businesses with international operations.
Business Cash Back Credit CardsThese cards provide cash back on purchases, often with higher percentages for certain spending categories like office supplies, telecommunications, or advertising. The cash back can be used to offset future purchases, essentially providing a discount on expenses.
Business Charge CardsUnlike traditional credit cards, these require you to pay off your balance in full at the end of each billing cycle. They don’t have a preset spending limit, offering flexibility for businesses with varying spending needs. However, late payments can result in hefty fees and a negative impact on your credit score.
Credit BuilderDesigned for businesses with limited or poor credit histories, these cards often have lower credit limits and fewer rewards. However, they can help businesses build a positive credit history by reporting to the major credit bureaus.
Business Credit Cards with 0% Intro APRThese cards offer a 0% interest rate for a promotional period, typically 6-18 months. Beneficial for businesses looking to finance large purchases or balance transfers without incurring interest during the promotional period.

Benefits of Business Credit Cards

Business credit cards come with various benefits that can support your business’s financial health and operational efficiency. Here are some of the key advantages:

1. Simplified Expense Tracking: Business credit cards often provide detailed statements and categorize expenses, which can help when it’s time to prepare tax returns or analyze spending patterns. Some cards also offer integration with accounting software, making it even easier to manage your financial records.

2. Separation of Personal and Business Finances: This is not only helpful for accounting purposes but is also beneficial for protecting your personal finances should your business face financial difficulties.

3. Cash Flow Management: Business credit cards can be particularly useful for covering expenses when waiting for payment from clients or during slow business periods.

4. Rewards and Incentives: Many business credit cards offer rewards programs that give points, miles, or cash back for purchases. These rewards can be reinvested into the business, saving money on future expenses.

5. Employee Cards: Business credit cards allow you to issue additional cards to your employees, complete with individual spending limits. This can streamline expense reimbursement processes and provide an easy way to track and control employee spending.

6. Building Business Credit: Regularly using and promptly paying off a business credit card can help build your business’s credit history. A strong business credit score can make it easier to secure loans or additional lines of credit in the future.

7. Increased Purchasing Power: Business credit cards often come with higher credit limits than personal cards, providing businesses with more purchasing power.

9. Travel Perks: If your business involves frequent travel, a business credit card can offer benefits like free access to airport lounges, travel insurance, and rewards points for flights and hotels.

While business credit cards offer numerous benefits, they also come with responsibilities. It’s crucial to use them wisely to avoid high-interest rates and debt and to understand all associated fees and terms.

How to Apply

Applying for a business credit card is a straightforward process, similar in many ways to applying for a personal credit card. However, there are some specific steps and information requirements that you need to be aware of. Here’s a step-by-step guide to help you navigate the application process:

Step 1: Determine Your Business’s Needs: Before you start the application process, identify what your business needs from a credit card. Are you looking for a card that offers rewards or cash back? Do you need a card that offers travel benefits or no foreign transaction fees? The answers to these questions will help guide you in choosing the right card.

Step 2: Check Your Business Credit Score: Just like with personal credit cards, your business credit score plays a significant role in your application’s approval. If you have established a credit history for your business, check your score before applying.

Step 3: Research and Compare Cards: Spend some time researching different business credit cards. Compare their interest rates, rewards programs, fees, and other features. Make sure to read the terms and conditions of each card thoroughly.

Step 4: Gather Required Information: When you apply for a business credit card, you’ll typically need to provide information about your business, including its legal name, address, and contact information. You’ll also need to provide your business’s tax identification number (in the UK, this would be your VAT number or your Company Registration Number (CRN)). Some issuers may also ask for information about your business’s revenue, your role in the business, and the number of employees.

Step 5: Fill Out the Application: You can typically apply for a business credit card online, although some issuers may also allow you to apply by phone or in person. Fill out the application with the required information. Be sure to double-check your answers for accuracy before you submit your application.

Step 6: Await Approval: After you submit your application, the card issuer will review it and check your credit. This process can take anywhere from a few minutes to a few weeks. If approved, you’ll receive your card in the mail, along with information about your credit limit and how to activate and use your card.

Step 7: Activate Your Card: Once you receive your card, you’ll need to activate it before you can start using it. This usually involves calling a phone number or visiting a website and providing some information to verify your identity.

Who can get a business credit card?

Business credit cards are not exclusive to established businesses. A wide range of individuals and entities can apply for and benefit from a business credit card, including:

  1. Limited Companies: These entities are often the most common users of business credit cards, using them to manage expenses, extend their cash flow, and build their business credit profiles.
  2. Sole Traders: If you’re a sole trader, you can still apply for a business credit card. These cards can help sole traders separate their personal and business expenses and potentially provide higher credit limits than personal cards.
  3. Partnerships: Partnerships can also get business credit cards, whether general or limited. These can simplify expense tracking and offer the business a convenient way to pay for supplies, services, and other necessary expenditures.
  4. Freelancers and Contractors: Even if you’re self-employed, you might benefit from a business credit card. If you have many business expenses, keeping those separate from your personal spending with a business credit card can be easier.
  5. Startups and New Businesses: Even if your business is new, you can apply for a business credit card. While you might not have a business credit history, the card issuer may consider your personal credit history during the application process.
  6. Nonprofits: Nonprofit organizations can also get business credit cards. These can help manage and track expenses, especially when multiple team members need to make purchases for the charity.

How Much Do Business Credit Cards Cost?

The cost of a business credit card can vary widely depending on the card issuer and the specific card you choose. Here are some of the typical costs associated with business credit cards in the UK:

  1. Annual Fees: Some business credit cards charge an annual fee, which can range anywhere from £0 to several hundred pounds. Generally, cards with higher annual fees offer more features and benefits, such as comprehensive rewards programs or travel perks.
  2. Interest Rates: If you don’t pay off your balance in full each month, you’ll be charged interest on the remaining balance. The interest rate is typically presented as an Annual Percentage Rate (APR), which can vary based on the card and your creditworthiness.
  3. Late Payment Fees: If you miss a payment, you may be charged a late payment fee. This fee can vary but is typically a fixed amount set by the card issuer.
  4. Foreign Transaction Fees: If you use your card to make purchases in a foreign currency, you may be charged a foreign transaction fee. This fee is usually a percentage of the transaction amount.
  5. Cash Advance Fees: If you use your card to withdraw cash from an ATM, you’ll likely be charged a cash advance fee. This fee is usually a percentage of the amount withdrawn and can also involve a higher interest rate on the cash withdrawn.
  6. Over-Limit Fees: If you exceed your credit limit, you might be charged an over-limit fee. Not all cards have this fee, and it can vary depending on the card issuer.
  7. Card Replacement Fees: If you lose your card and need a replacement, some issuers may charge a fee for this.

Remember, these are general costs and can vary significantly based on the specific card and the card issuer. Always read the card’s terms and conditions thoroughly before applying to understand all the associated costs.

Also, keep in mind that while a card with a high annual fee or interest rate might seem expensive, it could offer benefits or rewards that make it cost-effective for your business.

The Payment Process

Once you’ve activated your business credit card, it’s crucial to familiarize yourself with the billing and payment procedures:

1. Statement Date – The statement date refers to when your billing cycle concludes, and your monthly financial statement is generated. All transactions processed before this date will appear on the current month’s statement.

2. Due Date – The payment for the outstanding balance on your statement must be submitted by the due date. This date typically falls 20-25 days after the statement date.

3. Minimum Payment – By the due date, you’re required to make at least the minimum payment specified on your statement. However, it’s advisable to clear the entire balance when possible to avoid interest charges.

4. Auto-Pay Feature – Many card providers offer an auto-pay feature that allows you to automate payments for either the minimum balance or the full balance each month. Utilizing this feature can help ensure timely payments and eliminate the risk of late fees.

5. Payment Allocation – Your card provider applies payments to different balances (such as interest, fees, and purchases) in a specific order. Review your agreement or contact your provider to understand this allocation, as it may affect how quickly you can pay off different types of balances.

6. Late Fees – If your payment arrives after the due date, you’ll likely be charged a late fee. Avoid these unnecessary expenses by ensuring your payments are made promptly, either manually or through the use of automated payments.

Advantages & Disadvantages

Advantages of Business Credit Cards

  1. Superior Expense Management Business credit cards provide an effective method to manage, itemize, and categorize business expenses. They help business owners segregate professional expenses from personal ones, thereby simplifying accounting and tax preparation. The cards also serve as a convenient platform for employees to make business purchases, while giving businesses the ability to monitor employee spending.
  2. Attractive Incentives Business credit cards often come with unique benefits tailored to entice business customers. These may include cash back on purchases that businesses frequently make, such as office supplies, and larger sign-up bonuses to cater to high business spending. Many cards also offer an introductory period of 0% interest.
  3. Travel Perks Recognizing the extensive travel that many businesses undertake, numerous business credit cards offer travel-related rewards such as access to VIP airport lounges or discounts on hotel stays during business trips.
  4. Flexible Repayment Terms Some business credit cards offer flexible repayment terms to accommodate businesses that experience irregular cash flow patterns, which can be particularly beneficial for seasonal businesses.

Drawbacks of Business Credit Cards

  1. Personal Guarantee Requirement Many lenders require a personal guarantee from business owners or other individuals, especially for small businesses that may not meet certain credit scoring requirements. This personal guarantee can hold the guarantor liable for the card’s payments and fees. If the personal guarantee is invoked due to defaults, it could negatively affect the guarantor’s personal credit score.
  2. Limited Consumer Protection Business credit cards generally do not come with the consumer protections provided to personal credit cards, such as the restrictions on interest rate increases on existing balances outlined in the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009. Some card issuers might voluntarily extend these protections to business credit cards, but it’s not a standard practice, and users should not assume these protections unless explicitly outlined in the agreement.

Understanding the Business Credit Card Agreement

It’s vital to thoroughly understand the terms and conditions stipulated in any business credit card agreement before committing. This agreement is legally binding, setting forth your responsibilities and the potential costs associated with card usage.

Here are some essential areas to bear in mind:

1. Fees – Ensure you fully understand all applicable fees, which might include annual fees, foreign transaction fees, late payment fees, and more. These costs can accumulate rapidly, affecting your overall spending.

2. Annual Percentage Rates (APRs) – If you plan on carrying a balance from month to month, understanding the card’s APR is vital. Make sure to confirm whether the interest rate is fixed or variable.

3. Credit Limit – The credit limit set on the card should be evident. It is also crucial to understand whether issuing cards to employees will impact this limit.

4. Rewards Program – Familiarize yourself with the specifics of the card’s rewards program, including eligibility requirements and redemption procedures. Some cards may have restrictions or caps on the rewards you can earn.

5. Payment Application – Issuers might have different methodologies for applying payments. Some may apply your payment to the balance with the lowest interest rate first, leaving higher interest balances to accumulate more interest. This detail is crucial to understand as it can impact your total interest costs.

6. Liability – As the business owner, it’s essential to comprehend your responsibility for any debt accrued on the account. Some cards may require personal guarantees, making you personally liable for the debt.

7. Account Closure Terms – Investigate the provisions related to account closure, such as early termination fees or impacts on your credit score. These can have long-term implications, especially if you decide to close your account prematurely.


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