How to choose a business credit card

A business credit card lets you ring-fence outgoings related to your work, making it easier to keep track of your firm’s finances. Here we look at how to go about selecting one.

What is a business credit card?

A business credit card is just like a personal credit card in that you use it to make purchases up to a credit limit set by the provider. However, it differs from a personal credit card in certain ways. For example, it is in a company’s name rather than an individual's.

The key benefit of having a business credit card is that you can keep your work and personal spending separate and earn rewards that you can use to offset future purchases.

What types of business credit cards are there?

There are lots of business credit card types, each for a different target audience. For example, some card types suit fledgling firms, while others are ideal if you regularly travel overseas or buy equipment from specific retailers. 

Here’s a rundown of the different types of cards you could consider:

Credit building cards

These are also known as classic or basic business credit cards.

Key points:

• They are designed for start-ups with little or no credit history or firms that have suffered a setback that’s affected their credit rating

• They have low credit limits

• They have a high annual percentage rate (APR), which is how much you pay in interest if you don’t square the balance at the end of the payment cycle

• Most have no annual fee

• Many come with few or no perks or rewards

Read more: 

• How to get a business credit card with bad debt

• How to check your business credit report

0% interest cards

Cards in this category work like any other credit card, but you incur no interest on your balance.

Key points:

• In most cases, the 0% rate is introductory and lasts between 6 and 24 months, after which you pay interest on your purchases. It’s a good idea to shop around before the deal ends and switch if you find a better deal elsewhere  

• You may earn rewards, such as points that are redeemable on PayPal transactions or travel

• Annual fees may kick in either immediately or after an introductory period

• Some 0% interest business credit cards never attract interest and have no annual fees  

Rewards cards

Cards in this category may be good for business owners who pay off their balance at the end of each month and can take advantage of the benefits.

Key points:

• They come loaded with benefits that other cards don’t offer, such as points earned on everyday spending and bonus points on purchases at specific outlets

• Savvy bosses can find cards that offer rewards that suit their business needs, such as money off breakdown cover or healthcare plans

Travel rewards cards

Cards in this category are popular with businesses with significant travel-related costs.

Key points:

• They are essentially rewards credit cards where the benefits are travel related

• Benefits can include Avios points, discounts at airport-sited outlets and access to airport lounges

• Offers may include money off travel insurance, restaurants and car hire

• They have low foreign transaction fees

• They typically attract an annual fee in the first year or after 12 months 

Cashback cards

Cards in this category are useful for businesses with a spending pattern that enables them to earn cashback on big or regular purchases.

Key points:

• Earn from 0.5% to 1% cashback on some or all general spending

• Some providers offer uncapped cashback on purchases, while others impose a cap of £400 or £600 a year

• Some card providers give a higher rate of cashback on specific types of spending, such as office supplies, fuel or electric vehicle charging at service stations

•  Other benefits can include purchase protection and cardholder misuse insurance

• Cashback may offset future purchasing by offering a discount on expenses

• Many cashback cards don’t attract an annual fee

What can you use a business credit card for?

There’s no legal requirement to have a business credit card if you run a company or work for yourself. But they’re useful for:

• Buying equipment or paying for services and covering subcontractor costs

• Paying invoices

• Travel and accommodation costs

• Employee-related outgoings, including their expenses

Why might I consider opening a business credit card?

Business credit cards are attractive to companies for several reasons. For instance, they provide:

• An easy way to separate your business and personal spending

• Separate cards for individual employees, giving you a practical way to track their spending

• A helpful way to manage cash flow, such as monitoring invoice payments 

• An effective way to keep an up-to-date record of your business spending for your company and tax records

• Rewards programmes

Should I consider a charge card instead of a business credit card?

A charge card is similar to a credit card as both give you access to cash and rewards, such as cashback. They differ in that there’s no pre-set spending limit with a charge card - although that doesn’t mean you can make unlimited purchases. The other difference is that you must pay the entire balance by the end of each billing period. 

A charge card can be helpful if you need to fund a costly upgrade, and used well, it can also boost your credit rating.

Can you use a personal credit card for business?

It’s not advisable. The law views limited companies as separate legal entities from their directors. As such, limited companies must keep their finances, including all transactions, distinct from those of their directors. Business credit cards and business bank accounts can achieve this. 

Even if you’re not running a limited company, it makes sense to keep your personal and business affairs separate. And if your business is growing or you have staff who need to make purchases for the company, business credit cards could prove a better option than having staff invoice you for their expenses.

You should note that while you may be able to use your business credit card to pay invoices, you can’t use it to pay staff salaries.

Read more: Using a personal credit card for business

Can you use a business credit card for personal spending?

You can use your business credit card for personal spending, but it muddies the waters, given that the main reason to open one is to separate the two.  Of course, if you’re operating as a sole trader, you can use either card if you or your accountant is on top of things. However, if you run a limited company, you must keep your business records and transactions separate from your personal ones.

Also, check your card T&Cs, as there may be restrictions on how you earn points and other rewards that prohibit using the card for personal purchases. In any case, employees should never use their business credit cards for personal spending.