How to use a business credit card

Business credit cards should only be used for business purchases and expenses. This will help you to keep your personal and company finances separate. They’re ideal for making purchases that you can pay off quickly. By always paying on time and keeping within your credit limit, you can build your company’s credit score.

6 min read
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What is a business credit card used for? 

You can use a business credit card to: 

  • pay for purchases online or in-store, in the UK, and abroad
  • access cash quickly to help with cash flow
  • gain rewards (such as cashback or air miles)
  • build your business credit rating, if used responsibly

Remember, like a personal credit card, you will be charged interest each month unless you clear the balance in full before your next statement is due.

How do you use a small business credit card? 

Follow these tips to get the most out of your small business credit card.

Use it for business purposes only 

It’s a good idea to keep your personal and business finances separate. While you may have a personal credit card that you use to make purchases for yourself and your family, your business credit card should be strictly kept for business purposes. This will help to keep your accounts tidy and makes bookkeeping easier.

Limit the number of cardholders 

If you’ve never had a small business credit card before, it can be confusing trying to navigate multiple account holders making lots of purchases. So that you don’t lose control of your spending, it might be a good idea to limit the number of cardholders to just yourself initially, or maybe one other trusted employee. You can always add more later on.

Be vigilant 

You want to avoid any fraudulent use of your card. Keep an eye on exactly how much you and others are spending on your card by regularly checking your statements.

You could also set up a vigilant account system where each cardholder sends you their receipts as proof of purchase. Some cards allow you to turn on alerts when a purchase is made, so you can monitor the usage closely.

Since small business credit cards aren’t protected under the Consumer Credit Act, you’ll need to keep a strict eye on your finances.

Set a sensible credit limit 

The last thing you want is for your company to spend more than you can afford and then struggle to pay the lender back. Sliding into debt could incur late fees and damage your company’s credit score (and your own if you signed a personal guarantee).

When you apply for a credit card, the lender will ask you what you want your credit limit to be. Pick a sensible amount – one that you think you can easily manage. The lender will only give you a credit limit that they think you can afford. But if you’re worried, it may be worth asking for a low credit limit to start with. You may be able to increase it later if the lender can see that you are managing your credit well.

Bear in mind, you may be able to borrow more with a business credit card, but interest rates tend to be higher compared to personal credit cards, so you need to factor this into your budget. The exact amount you will be charged will depend on your company’s circumstances, including its credit score.

Keep your credit utilisation ratio low 

Your credit utilisation ratio is how much credit you’ve used versus how much credit is available to you on your credit cards and overdrafts, expressed as a percentage. Keeping this low (30% or less) will show that you’re a responsible borrower and should help to build your credit score.

If you’ve got a very high credit utilisation ratio, future providers may see this as a red flag.

Pay on time, every time 

If you can manage it, you should make your repayments in full and on time, every time. Doing so means that you can access credit without having to pay interest. But if you can’t manage the full repayment, at least make sure you can manage the minimum amount. This will stop your business’s credit score from getting damaged and late fees from being applied.

Take advantage of rewards 

Many business credit cards come with rewards, like cashback incentives, discounts and travel insurance, to name a few. Make sure you prioritise finding a business credit card that you’re going to get the most out of by doing adequate research. Don’t apply for a card with rewards you won’t use, because you could be paying extra for no benefit.

Remember, the providers that offer rewards tend to charge an annual fee, which can vary from one lender to another. It’s more common to be charged an annual fee on a business credit card than a personal credit card, though some cards may give you the first year without an annual fee as an incentive.

Use bookkeeping tools 

Many business credit cards will come with online bookkeeping tools to help you manage your accounts. These tools can come in very handy when it comes to paying taxes and monitoring spending on the card.

Use for short-term spending only 

Large purchases can max out your credit card and leave you without a source of funds for future expenses. Therefore, it’s not always the best decision to use your credit card for long-term spending, especially if you can’t pay the amount off in full before the interest kicks in at the end of each month.

Credit cards often have much higher interest rates than loans - and small business credit cards are no exception. If you need to purchase something worth a few thousand pounds, it may be worth considering a self-employed loan instead if you’re eligible for one.

When should you use your business credit card? 

You should use your business credit card to make purchases that are for business reasons only. Doing so will help you build up your company’s credit profile – as long as you manage the spending and repayments responsibly.

However, not managing your business credit card properly could lead your company into debt and damage your business credit score (and possibly your own credit score too). You’ll need to keep an eye on your spending and fees, including any charges for using your card abroad if you travel for work.

What fees can you incur when using a business credit card abroad? 

Depending on your credit card provider, you may face the following charges if you use your business credit card abroad:

  • credit card surcharge – this is where the merchant charges you for using your business credit card outside of the UK
  • merchant currency conversion – the merchant’s bank may also charge you if you want to pay in pounds instead of in the local currency
  • foreign transaction fee – your provider may charge you a percentage for making an overseas transaction
  • cash advance fee – some credit card providers will charge you a fee for withdrawing cash from an ATM or getting cashback
  • cash machine fee – some ATM owners may also charge you a fee for using their machine to withdraw cash

Disclaimer: All information and links are correct at the time of publishing.