What is a business credit card?

How do business credit cards work?

Business credit cards work just like personal credit cards. They provide companies with a line of credit up to a set limit and can be used to make purchases. The difference is that the credit card account is in your company's name, not your own.

This means that  your business and personal finances will be separate, which can make it easier to keep accurate records of your spending.   

What are the benefits of business credit cards?

• Manage your cash flow so you can pay for items when you are waiting for incoming money, such as a customer paying a bill.

• Extra cards, allowing you to  issue several employees with cards linked to one account with just one bill to pay.

• Work expenses can be paid for on a credit card, which removes the need for expenses forms and refunding your employees.

• Itemised statements for each card lets you keep track of what the whole company, a department or an individual is spending.

• Accounting is easier if you use card statements instead of receipts and paperwork. You can download them into specialist accounting software or Excel.

• Emergency money from your credit card gives you immediate access to funds.

• No interest will be charged for up to 56 days if you pay your statement in full.

How are business credit cards different to normal credit cards?

Although business credit cards work much like any other credit card, there are some differences.

For a start, you can usually borrow more with a business credit card because this is based on your business income, not just your personal income.

If you meet all your repayments on time, having a business credit card can also help you build your company's credit profile, which could help you get loans or other credit in the future.

Protection on a business credit card

The protection available on business cards also differs to personal cards, as Section 75 does not apply on business credit cards.

However, some card providers offer:

• Online guarantees to cover you against fraudulent online use

• Insurance to cover misuse of the card by an employee

• Extra insurance to cover any fraud or misuse

Some also add free travel insurance cover for medical expenses, accidents and lost luggage.

What can you use business credit cards for?

You can use business credit cardsto buy anything you could normally pay for with a credit card, for example:

• Business equipment

• Paying invoices

• Travel expenses

• Office expenses

• Furniture

• Entertaining clients

If you are able to pay it back quickly, you could even use the card for larger purchases instead of a short term loan.

Who can get a business credit card?

You can usually take out a business credit card whether you are a sole trader or help run the finances of a larger company.

There is usually a minimum amount your business will need to earn to qualify, and some cards only accept certain types of company. 

Some banks offer different products and services depending on the size of your business, for example:

• Start up businesses

• Companies with turnover of up to £2 million

• Companies with turnover of more than £2 million

• International businesses

Business credit cards are only available if you are over 18 and live in the UK. Your business must to be registered in the UK*. Some cards are only available if you also take out a current account with the provider.

* Including the Isle of Man, Channel Islands or Gibraltar.

Can I get a business credit card as a start-up?

If your company is just starting out you may find it harder to get accepted for a business credit card as you’re unlikely to have much of a business credit history. This means lenders have no way of knowing how reliable you are as a borrower.

If you are accepted, you might have to put up with a higher rate of interest and/or a lower credit limit.

However, some lenders will also look at your personal credit score to help them determine whether they are prepared to let you borrow with a business credit card. 

If your personal credit score is healthy, you have a greater chance of being accepted. And as you spend on your business card, you will be able to build up a credit history for your company.

How can I apply for a business credit card?

You can apply for a business credit card online, by phone or by visiting a branch of the provider that offers the card.

Some providers will only let you apply if you already hold an account with them, or will insist you apply over the phone if you're a new customer.

When a credit card company looks at your application, they will base their decision on:

• What they think your business can afford

• Your company's assets

• Your business' credit history

Information required

You will need to provide several details when you apply, including:

• Your company's name

• The type of business you run, eg sole trader or limited company

• The sector your business works in, eg retail

• The number of people you employ

• When your business started trading

• What you need the card for, eg purchases or cashflow

• The credit limit you'd like for the card

• What countries you trade with

You will also need to provide your personal details, and the details of any other employees you want to issue with a card. You may need to confirm your:

• Full name

• Date of birth

• Three years of previous addresses

• Contact details

Make sure you have all the details you need before you start your application. Here is everything you need to know about how to apply for a credit card.

How many credit cards can a company have?

There is no limit to the total number of cards your company can hold, although some providers restrict how many you can take out with them. Holding more cards means you will have more credit available to spend with, so some providers might be put off if you have too many cards already.

How much do business credit cards cost?

The main costs of a business credit card are:

• Any annual fees

• The interest rate if you do not clear the balance in full every month

• Charges for going over your credit limit, missing payments and so on

Business credit cards' interest rates and fees can be higher than on standard cards, and many of them charge annual fees (although some are free for the first year).

Find out more about how to understand credit card charges.

What credit limit will your business get?

The credit limit is the maximum balance you can owe on your card.

The credit limit you are offered will depend on your business' financial strength and credit score rather than your personal circumstances.

If your business has a strong credit history, you will usually be offered a higher credit limit as well as a lower interest rate.

If you give supplementary cards to several employees you can sometimes set an individual credit limit to each person, depending on how much you are happy to let them spend each month.

What types of business credit cards can you get?

Business credit cards can come with the following features:

• 0% on purchases giving you months to pay off your purchases interest-free

• Cashback giving you back a percentage of what you spend over each year

• Air miles giving you points you can exchange for flights

• Other rewards which can be exchanged for shopping vouchers and other discounts

• Credit cards designed for travel which offer lower fees on spending abroad

Our business credit card comparison includes cards of each type.

What are the alternatives to business credit cards?

You could spend on the debit card linked to your business' current account or get a charge card instead.

You have to pay off the balance of a charge card in full every month, meaning you cannot use them to borrow beyond the repayment date or build up debts.

To find out more, read our guide on understanding business loans vs line of credit vs credit cards.