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Business credit cards can boost your cash flow and simplify expense accounting, while also netting you some great rewards, benefits and discounts.

Business credit cards are available to businesses of all shapes and sizes, from sole traders to large corporate enterprises. Used sensibly they can hugely benefit you and your company, but if you rush in without careful consideration of your business’s needs and forecasted spending, they can be a comparatively costly form of borrowing.

Who can apply for a business credit card?

As the name suggests, business credit cards are only accessible to business owners. Every issuer will have their own specific eligibility criteria, and these should be clearly stated when you apply for the card. Some of the basic eligibility criteria will typically include:

  • You must be over the age of 18.
  • You must be a UK resident or UK business.

Further to this, issuers can impose further criteria, which may include:

  • Must already hold a business bank account – sometimes issuers will only consider applicants who have a business bank account with them.
  • Minimum trading history – typically you must have been trading for at least 12 months.
  • Minimum annual turnover – the minimum amount differs by issuer, but can be as low as £24,000.
  • No bankruptcies or CCJs against the business and/or the business owner.
  • Credit check – the nature of the credit check will depend on how your business is structured. For example, if you are a sole trader, the credit check is likely to be undertaken on a personal level, whereas a large limited company is likely to be undertaken on a business level.
  • Some credit card issuers will only offer cards to certain business structures – limited companies rather than sole traders, for example – so it’s worth checking before you apply.

What are the pros and cons of business credit cards?

Pros

Perhaps the most obvious benefit with business credit cards is the boosting of cash flow, with an interest-free window of 37 to 56 days between making purchases and the balance being due. This can be especially beneficial if you need to make large purchases for the business before you actually have the necessary funds in the bank, and you pay off your balance in full every month.

The credit limit on business credit cards tends to be much higher than conventional personal credit cards, and on occasion they have no credit limit at all, allowing for more freedom with your business spending.

Business credit cards also allow a complete separation of personal expenses and business expenses, creating less invoicing between the two and thereby making accounting much simpler.

Many business credit card issuers will let you have multiple credit cards attached to the same account, which can be used by employees. These extra cards can be preprogrammed with a limit, or a budget for each card, again making the budgeting and accounting process much less complicated and time-consuming.

If you’re a sole trader or in a traditional business partnership you can still gain the credit card purchase protection that Section 75 offers consumers. Section 75 can be even more valuable for business purchases than it is for personal shopping, because business transactions are more likely to fall within Section 75’s eligible purchase price range of £100 to £30,000. That said, while limited companies are not covered by Section 75, many issuers do offer their own bespoke protection, each with their own rules and limits.

Beyond the interest free period and the improvements to accounting, business credit cards often come with an array of tempting introductory bonuses, rewards, cashback, loyalty scheme points, airmiles, insurances and discounts.

Cons

Most business credit cards tend to come with annual fees, which need to be factored in when you are evaluating whether a particular business card is going to be beneficial to you.

The interest rates on different business cards vary much more greatly than personal credit cards. It is always worth shopping around for one with a comparatively low rate, because even if it is your intention to pay off the balance in full every month, this may not always be possible in the unpredictable world of business, and it could prove to be quite a costly form of borrowing.

As with most credit cards, fees are charged for exceeding your credit limit, not paying at least your minimum payment when it becomes due, or using your card for spending abroad. It is always best to check out the particulars of each card carefully, to ensure you are getting the best for you and your business.

What are the things to consider when choosing a business credit card?

Before assessing the benefits and potential pitfalls of particular business credit cards, it is always advisable to sit down and consider your own business structure, and work out how much, where, and on what your business spends its money. That way you will be aware of what (if any) rewards you will be entitled to. Some questions to ask could include:

Can you comfortably clear your balance every month? – If yes, and your credit history is good, then you will undoubtedly benefit from all the tempting rewards and benefits that business credit cards and charge cards can offer. It is always best to work out your likely expenditure on any given card and include the monthly fee, to ensure that the rewards you reap will outweigh any price you will pay.

Do you need to pay off your business credit card balance over time? – If yes, then it is advisable to seek out a low interest business card, otherwise it could turn out to be a very costly form of borrowing. A lower cost alternative may be a business loan.

Do you travel much as part of your business or personally? – If yes, then a business credit card or charge card that offers airmiles or travel-related benefits as part of their reward package may prove to be hugely beneficial.

Is fuel a large proportion of your business expenses? – If yes, then a fuel card may be of more use to you. Fuel cards offer discounts at particular petrol stations (or lower discounts at a greater range of petrol stations). It may be worth working out how much you will save with a fuel card against how much you will gain with a business card.

Are you a sole trader with a poor credit rating? – If yes, then you are unlikely to pass the credit check for a business credit card. A business prepaid card, or even a personal prepaid card, may be a more sensible alternative.

Business credit card FAQ

I only have a small business. Will I be accepted for a business credit card?

Every credit card issuer has their own eligibility criteria, both in regards to what types of business set-ups they will accept – for example, only limited companies – and minimum turnover requirements (which can be as high as £2 million per year). If you have a small business, a comparison table can be invaluable for filtering out the products that don’t apply.

I am a sole trader with a bad credit score – will I be accepted for a business credit card?

As a sole trader, there is no legal distinction between your personal finances and those of your business. When you apply for a business credit card, your creditworthiness will be assessed – and if you have a bad credit record, you are less likely to be accepted. It may make more sense to apply for a credit building credit card until you can improve your credit score to a level where you are more likely to be accepted for a more conventional credit card. Another alternative is to apply for a business prepaid card, which doesn’t offer any form of credit, but it will help separate your personal and business finances.

Where should I start with choosing a business credit card?

You should begin by working out why you want a business credit card. If you are looking for a card to ease your cashflow in the short term, and are in a financial position to repay your balance in full at the end of every month, then you should look through all the rewards and benefits that some cards offer. On the other hand, if you’re looking for longer-term borrowing on your credit card, then the APR rate should be of the utmost importance, so begin there. There’s no reason to restrict yourself to just business credit cards either – many business prepaid cards offer tempting rewards, help with invoicing and expenses, and offer multiple cards with programmable budgets and limits for use by employees.

I need cash for my business – is a business credit card the answer?

Credit cards are rarely the right answer when considering how to get cash, and this is certainly no different with business credit cards. The APR on business cards tends to be higher than general cards for individuals anyway, but can become even more crippling with the yet higher APR on cash withdrawals and the withdrawals fees that can be charged on top. A better alternative would be to consider a business loan. If you only need the cash for a short period, look for a loan with no financial penalties for repaying the loan early. If you are a sole trader, you could look for a 0% money transfer credit card, where you can transfer money from your credit card to your bank account, then pay it off, interest-free over a period.

Now read our guide to using a credit card correctly