A Guide to Choosing the Right Business Credit Card

Selecting the right credit card for your UK business is a critical decision that can significantly impact your company’s financial success and growth. With a wide array of credit card options available, it is essential to understand how to navigate through them to find the most suitable one for your business needs. In this guide, we will explore the importance of choosing the right credit card and how credit cards can benefit businesses in the UK. Understanding these factors will empower you to make informed decisions and leverage the potential rewards and financial advantages that the right credit card can offer to support and optimise your business operations.

Understanding Business Credit Cards

A business credit card is a financial tool designed specifically for business owners and their companies. It functions similarly to a personal credit card, but it is intended to be used exclusively for business expenses, making it an essential resource for managing business finances and cash flow. 

Key features and benefits of business credit cards

Business credit cards offer a range of features and benefits tailored to the needs of businesses, providing convenience, flexibility, and financial perks. 

Expense Tracking and Reporting 

Business credit cards simplify the tracking of business expenses. They provide itemised statements, categorising expenses, which aids in budgeting, accounting, and tax preparation. This feature helps business owners separate personal and business finances, which is crucial for legal and tax reasons.

Credit Limit 

Business credit cards often come with higher credit limits compared to personal credit cards. This allows businesses to manage larger expenses and cash flow needs effectively.

Employee Card Management 

Business credit cards allow owners to issue multiple cards to employees with preset spending limits. This enables delegation of spending authority while retaining control over expenditures. Additionally, some cards provide spending reporting on individual employee cards for enhanced monitoring.

Rewards Programs 

Many business credit cards offer rewards programs tailored to business spending. These rewards often include cashback, airline miles, travel perks, and discounts on business-related expenses, such as office supplies and travel accommodations.

Similarly, business credit cards may come with attractive introductory offers, such as zero percent APR for a limited period, providing an opportunity for interest-free financing on purchases or balance transfers.

Building Business Credit 

Using a business credit card responsibly can help establish and build the business’s credit profile. A positive credit history can be beneficial when seeking loans or credit in the future.

Expense Flexibility 

Business credit cards offer financial flexibility, allowing businesses to make necessary purchases or handle unexpected expenses even if cash flow is temporarily constrained.

How business credit cards differ from personal credit cards

In addition to the benefits provided by a business credit card, there are other fundamental differences between business and personal credit cards that may influence your decision. There are four key differences you should consider;

  1. Liability: While personal credit cards hold the cardholder personally liable for any debt, business credit cards are typically issued with the business entity as the primary account holder. This means that business owners are not personally responsible for the company’s debt. However, some business credit cards may still require a personal guarantee from the business owner, making them partially liable.
  2. Legal Protections: Consumer credit cards are governed by the CARD Act, which provides certain legal protections to individual cardholders. Business credit cards do not benefit from the same level of legal protection, as they are intended for commercial use and assume a higher level of financial sophistication.
  3. Credit Reporting: Business credit card activity is usually reported to business credit bureaus, such as Experian Business and Equifax Business, while personal credit card activity is reported to consumer credit bureaus. This distinction helps establish separate credit histories for the business and its owner.
  4. Spending Habits: Business credit cards are meant for business-related expenses, while personal credit cards are used for individual spending. Mixing these expenses can complicate accounting, tax reporting, and financial management.

Types of Business Credit Cards Available

Once you have made the decision to get a business credit card, it is time to choose one that works best for you and your business. Each type of business credit card has its advantages and is designed to cater to different businesses’ unique needs and spending habits. 

When choosing a business credit card, it’s essential to consider the specific features, rewards, and benefits that align best with the company’s financial goals and spending patterns.

Traditional Business Credit Cards

Traditional business credit cards are standard credit cards designed specifically for businesses. They offer features like expense tracking, employee card management, and higher credit limits compared to personal credit cards. These cards do not come with specific rewards or cashback programs but provide the fundamental benefits of a business credit card, such as easy separation of personal and business expenses and building the business’s credit profile.

Rewards Credit Cards

Rewards business credit cards offer incentives to businesses for their spending. They often come with rewards programs that provide points, miles, or cashback on various business-related purchases. These rewards can be redeemed for travel, merchandise, statement credits, or other perks. Rewards credit cards are suitable for businesses with significant expenses that can take advantage of the rewards offered to offset some of their costs.

Cash Back Credit Cards

Cash back business credit cards are a type of rewards card that provides cash rebates on eligible business purchases. They offer a percentage of the purchase amount back to the cardholder as a cash reward. This type of card is popular among businesses that prefer straightforward rewards in the form of cash, as it can be easily applied to offset expenses or reinvest in the business.

Travel Credit Cards

Travel business credit cards are tailored for businesses that frequently incur travel-related expenses. They offer rewards in the form of airline miles, hotel points, or travel credits. These rewards can be used to cover business travel expenses, such as flights, hotel stays, and car rentals, making them valuable for companies with substantial travel needs.

Low-Interest Credit Cards

Low-interest business credit cards provide a lower Annual Percentage Rate (APR) compared to other credit cards. These cards are beneficial for businesses that need to carry a balance from month to month or finance larger purchases over time. With lower interest rates, businesses can save on finance charges and manage their cash flow more effectively.

Secured Credit Cards for Businesses

Secured business credit cards are designed for businesses with limited or poor credit histories. They require a cash deposit as collateral, which becomes the credit limit for the card. Secured cards help businesses build or rebuild their credit by demonstrating responsible credit card usage. As the business establishes a positive credit history, it may become eligible for unsecured credit cards with higher credit limits and better terms.

Co-branded Business Credit Cards

Co-branded business credit cards are issued in partnership between a credit card company and a specific brand or organisation. These cards offer rewards and benefits tailored to the target audience of the partnering brand. 

For example, a co-branded airline credit card may offer exclusive travel perks and rewards with that airline. These cards are particularly attractive for businesses with a strong affinity for the co-branding partner or frequently using their products or services.

Factors to Consider When Choosing a Business Credit Card

Choosing the right business credit card is a crucial decision for business owners, as it can significantly impact the company’s finances and operations. Considering the following factors when selecting a business credit card can help ensure that the chosen card aligns with the business’s needs and maximises its benefits:

Credit Limit

The credit limit on a business credit card determines the maximum amount the business can borrow at any given time. It is essential to assess the credit needs of the business and choose a card with a suitable credit limit that accommodates expected expenses without being excessive. A higher credit limit allows for greater purchasing power, but it should be manageable to avoid overextending the business’s finances.

Interest Rates and APR

The interest rate and Annual Percentage Rate (APR) on a business credit card significantly impacts the cost of carrying a balance from one billing cycle to the next. Lower interest rates are preferable, especially if the business anticipates carrying a balance occasionally. Comparing APRs can help businesses identify the most cost-effective credit card option.

Annual Fees and Other Charges

Some business credit cards come with annual fees, while others may have various transaction fees, such as balance transfer or cash advance fees. It’s crucial to evaluate these fees and charges to understand the overall cost of using the credit card and determine whether the benefits outweigh the costs.

Rewards and Incentive Programs

The rewards and incentive programs business credit cards offer can provide significant value to the company. Businesses should consider their spending patterns and choose a card with rewards that align with their needs. For example, a travel rewards card may be more beneficial than a cashback card if the business involves frequent travel.

Introductory Offers and Promotions

Many business credit cards offer attractive introductory offers, such as zero percent APR for a limited period or bonus rewards for meeting specific spending requirements. These promotions can provide valuable benefits in the short term, making it essential to understand the terms and take advantage of these offers when applicable.

Reporting to Credit Bureaus

Business credit cards that report activity to business credit bureaus help build the credit history of the business. A positive credit history can open doors to better financing opportunities and favourable terms for future loans or credit lines.

Additional Cardholder Benefits

Some business credit cards come with additional perks, such as travel insurance, purchase protection, extended warranties, and expense management tools. Assessing these benefits can provide added value and streamline business operations.

Acceptance and Network Coverage

It’s essential to consider the card’s acceptance and network coverage. Ensure that the credit card is widely accepted by vendors and suppliers the business frequently deals with. Cards affiliated with major payment networks like Visa or Mastercard usually have broader acceptance.

Eligibility and Application Process

Obtaining a business credit card requires meeting specific eligibility criteria and completing the application process. Here’s a step-by-step guide that covers the business requirements, necessary documentation, and tips for improving approval chances:

Business Requirements for Credit Card Eligibility

To be eligible for a business credit card, a company must have a legally recognised business entity, including sole proprietorships, partnerships, corporations, or LLCs. The business should have a verifiable and positive credit history, separate from the owner’s personal credit, demonstrating responsible credit management. Some credit cards may also consider the business’s age, requiring a minimum time in operation. Having a strong credit profile and financial stability increases the likelihood of approval while maintaining a clear separation between personal and business finances reinforces the legitimacy of the business.

Documentations and Information Needed for Application

By understanding the eligibility requirements and preparing the necessary documentation, you can increase your chances of approval for a business credit card.

  • Business Information: You will need to provide basic details about your business, including its legal name, physical address, phone number, and industry.
  • Employer Identification Number (EIN): Most business credit card applications require an EIN, which is a unique tax identification number assigned to your business by the IRS.
  • Financial Information: You may need to provide details of your business’s annual revenue, profit/loss statements, and bank account information.
  • Legal Documents: Depending on your business structure, you may need to submit legal documents, such as articles of incorporation, partnership agreements, or LLC operating agreements.
  • Ownership Information: Some credit card applications may require information about the business owners, including names, social security numbers, and percentage of ownership.

6 Tips for Improving Your Chances of Approval

Here are six tips to help you boost your business’s chance of approval for your chosen credit card:

  1. Establish a strong credit history. 
  2. Separate personal and business finances. 
  3. Maintain a healthy debt-to-income ratio. 
  4. Regularly check and keep updated with your business credit report.
  5. Using our helpful advice, ensure you choose the right credit card for your business. 
  6. Apply at the right time when your business is in good financial standing.  

Managing Your Business Credit Card

Managing your business credit card effectively is crucial for the financial health and success of your company. Proper management ensures responsible credit card usage, reduces interest charges, helps monitor expenses, and builds a positive business credit profile, providing various benefits for the business.

Responsible Credit Card Usage

Using your business credit card responsibly involves spending within your means and making timely payments. This not only helps avoid excessive debt but also demonstrates financial responsibility, which can lead to better credit terms and higher credit limits in the future. Responsible usage also fosters a positive relationship with the credit card issuer, enhancing your business’s credibility.

Payment Strategies to Avoid Interest Charges

Paying your credit card balance in full and on time each month is a smart payment strategy. By doing so, you avoid accumulating interest charges on the carried balance. Interest can add up quickly and become a financial burden for your business. Managing your cash flow efficiently and budgeting for expenses can ensure you have sufficient funds to settle your credit card bills promptly.

Monitoring and Tracking Business Expenses

Using a business credit card simplifies expense tracking. Regularly monitoring your credit card statements and categorising expenses helps you gain insight into your company’s spending patterns. This practice aids in budgeting, accounting, and identifying areas where cost-cutting measures can be implemented. Proper tracking also ensures that personal and business expenses remain separate, which is crucial for legal and tax purposes.

Building and Improving Business Credit

Consistently managing your business credit card responsibly contributes to building a strong credit profile for your company. Timely payments and low credit utilisation demonstrate creditworthiness to lenders and business credit bureaus. A positive credit history can enhance your business’s ability to secure loans, lines of credit, and favourable financing terms in the future, providing opportunities for business growth and expansion.

Understanding the Fine Print

Understanding the fine print of your credit card agreement is of utmost importance to protect your business’s financial interests and avoid potential pitfalls. Failing to comprehend the terms and conditions can lead to unexpected fees, higher costs, and detrimental consequences for your business credit.

Reading and Understanding Credit Card Agreements

Credit card agreements contain detailed information about fees, interest rates, credit limits, rewards, penalties, and other terms that govern your business credit card use. Taking the time to read and comprehend these agreements ensures that you are fully aware of your obligations and rights as a cardholder. This knowledge empowers you to make informed financial decisions and use the credit card responsibly.

Common Pitfalls to Avoid

Understanding potential pitfalls can allow you to proactively manage your business credit card usage and minimise unnecessary costs.

Introductory Offers

Be cautious of attractive introductory offers, such as zero percent APR for a limited period, as they often transition to higher interest rates after the promotional period ends.

Annual Fees

Some business credit cards have annual fees, and while they may offer valuable rewards, it’s essential to assess whether the benefits outweigh the costs.

Balance Transfer Fees

Transferring balances from one card to another may incur balance transfer fees, impacting the cost-effectiveness of consolidating debt.

Late Payment Penalties

Late payments can trigger penalty fees and potentially increase the APR, negatively impacting your business’s credit score.

Cash Advance Charges

Cash advances on credit cards usually come with higher interest rates and transaction fees, making them costly and best avoided whenever possible.

Overlimit Fees

Going over the credit limit can result in additional fees and may harm your business’s credit rating.

Variable Interest Rates

Some credit cards have variable interest rates tied to market benchmarks, making borrowing costs unpredictable.

Expiration of Rewards

Be aware of any expiration dates on rewards or points earned with your credit card to maximise their benefits.

Security and Fraud Protection

Security and fraud protection are paramount when it comes to business credit cards. As businesses rely heavily on credit cards for transactions and expense management, ensuring the security of financial information and promptly addressing any fraudulent activities is essential for safeguarding the company’s assets and reputation.

Security Measures in Business Credit Cards

Business credit cards come with various security features to protect against unauthorised use and fraud. Some of these measures include:

EMV Chip Technology

EMV chips generate unique transaction codes for each transaction, making it difficult for fraudsters to replicate card information.

Card Verification Code (CVC/CVV)

Business credit cards have a three- or four-digit code on the back (CVC) or front (CVV) of the card. This code is required for online and over-the-phone transactions, adding an extra layer of security.

Fraud Monitoring and Alerts

Credit card issuers employ sophisticated systems to monitor transactions for suspicious activity. Suppose unusual or potentially fraudulent transactions are detected. In that case, the card issuer may contact the cardholder to verify the legitimacy of the charges.

Zero Liability Protection

Many business credit cards offer zero liability protection, ensuring the cardholder is not held responsible for unauthorised charges if promptly reported.

Reporting Fraudulent Activities

Reporting fraudulent activities on a business credit card involves swift action to mitigate potential losses and protect the company. 

If any unauthorised charges or suspicious transactions are noticed, immediately contact the credit card issuer’s customer service or fraud department. Inform them of the fraudulent activity and request the card to be deactivated or frozen. Fill out any required fraud dispute forms and provide supporting documentation. Consider filing a police report to document the incident. Review and enhance your business’s security measures to prevent future occurrences, and collaborate with the card issuer to resolve the issue promptly.

Choosing the Right Credit Card for Your Business

Choosing a business credit card that aligns with your company’s needs and requirements is paramount for maintaining strong financial health and optimising business operations. 

By carefully considering factors such as credit limit, interest rates, rewards programs, and fees, you can maximise the benefits and savings the card offers. Understanding the fine print, managing the card responsibly, and prioritising security measures ensure the card becomes a valuable financial tool rather than a potential liability. 

A well-suited business credit card empowers you to track expenses efficiently, build a positive credit profile, and access financial flexibility when needed, ultimately contributing to your business’s long-term success and growth.


News & Articles FAQs

Do business credit cards affect personal credit?

In most cases, business credit cards do not directly affect personal credit. Business credit cards are typically issued based on the creditworthiness of the business and are associated with the business’s credit profile. However, some credit card issuers may require a personal guarantee from the business owner, which means the owner could become personally liable for the debt and impact their personal credit if they default on payments.

Can I use a personal credit card for business?

Yes, you can use a personal credit card for business expenses. However, it is generally recommended to keep personal and business expenses separate for better financial management and accounting.

Can you use a business credit card for personal use?

Using a business credit card for personal use is generally discouraged, as it can lead to accounting complications and potential legal and tax issues. Business credit cards are intended for business-related expenses only, and mixing personal and business transactions can make tracking and managing finances challenging. Additionally, using a business credit card for personal use may violate the card agreement’s terms.

Can you get a business credit card with bad credit?

Obtaining a business credit card with bad credit can be challenging but not impossible. Many business credit card issuers assess the business’s creditworthiness, and some may also consider the business owner’s personal credit, especially for newer or smaller businesses. If the business has poor credit, it may result in higher interest rates, lower credit limits, or the need for a secured credit card where a cash deposit is required as collateral.

What do I need to get a business credit card?

To get a business credit card, you typically need a legally recognised business entity (e.g., sole proprietorship, partnership, corporation, or LLC), basic business information (such as legal name and address), an Employer Identification Number (EIN), and sometimes financial documents like revenue details or bank account information.