Should I have a business credit card?

A business credit card can help you build a credit history for your company and enable you to manage your business finances more effectively. However, using your card irresponsibly can damage your credit score and lead to financial difficulty. So, you need to make sure you can afford one before you apply.

5 min read
man handing over a credit card

Why should I get a business credit card?   

A business credit card might be the best way of accessing credit for your business. There are several benefits to getting one, as shown below.

Helps to manage your business expenses

It’s important for you to keep your business and personal finances separate – you don’t want to accidentally confuse them and have a nightmare when it comes to doing your taxes. With a business credit card, you can use your credit statements to manage your business expenses effectively.

Builds up your business credit history

If you’re a small or new business, it’s likely that you have a relatively low business credit score. This doesn’t mean that you’re bad with managing money, it might be because you haven’t had a chance to build a business credit history yet.

A business credit card is a great way to build your business credit history – as long as you make your repayments on time each month. 

If you miss or make late repayments it could damage your business credit score further.

Employees can be added as cardholders

It can be a lot of work for you to make all the purchases in your company if you manage multiple employees. Adding trusted employees to the card allows them to make purchases on your behalf.

If you’re worried about them overspending, you can always look for a card that offers these common features:

  • capped spending – you set separate credit limits for your employees
  • authorisation – they can’t spend anything unless you authorise the purchase first
  • notifications – you get notified whenever a transaction is made

Gain business rewards

Many business credit cards come with rewards. These can be really beneficial to your company if you pick a card that has the right benefit for you. For example, if you travel a lot, you may choose a card with free travel insurance. Or you may prefer one with cashback. You can prioritise which reward you want when you do your initial search for a business credit card.

Access credit sooner

If you need to make business purchases soon but don’t have the cash available immediately, a business credit card could be a good solution. Since you need to make at least the minimum payment each month, you need to be certain that you can afford the purchases. Otherwise, you may find yourself sliding into debt.

Factors to consider before applying for a business credit card 

Make sure you consider all the factors carefully to make the best decision for your business. Ask yourself the following questions.

Do I need a business credit card?  

If you don’t really need a business credit card, it might be best to leave it for now. You could consider getting a business debit card instead if you want to separate your finances but don’t need access to credit.

Would another product suit me more?

Other forms of credit you may want to consider include a:

  • personal credit cardjust be aware that these are designed for personal use only
  • business loan – this can only be used for business purposes. You usually need a good business credit history to get accepted as they are for larger amounts compared to credit cards

Might I spend more than I can afford?

With any form of credit, there is a chance that you might spend more than you can afford. With a business credit card there’s also the possibility that you may fall behind with repayments if your business loses profit.

If you’re worried about whether you’ll be tempted to use the card irresponsibly, one solution could be to set yourself a very low credit limit initially. But if you don’t think you can manage a business credit card well, it may be best not to get one at all.

Will I have to take out a personal guarantee?

If your business is new or small, it’s likely that most lenders will require you to take out a personal guarantee. This is where you sign a legal agreement to promise that you will pay off your business credit card if your company can’t afford to. You need to be comfortable with tying your business finances to your personal one in this way before you sign anything.

Remember, if you do sign a personal guarantee, then it could affect your personal credit score as well as your business score if payments are missed.  

Do I get consumer credit protection?

With a personal credit card, your purchases between £100 and £30,000 are protected by the Consumer Credit Act. If something happens with the transaction or you are a victim of fraud, you are covered by your lender.

This isn’t the case with business credit cards. You need to be aware that they don’t come with consumer credit protection. However, some cards offer insurance for in-store or online transactions.

Should I get a personal or business credit card?  

It may be a good idea to get a business credit card if you need to draw a line between your business and personal expenses. Some things worth considering are:

  • if you use a personal credit card for business purposes you will be mixing your business and personal finances, which can be messy
  • it’s more common for business credit cards to have annual fees and rewards, compared to personal credit cards
  • if a different form of credit may be better suited to your needs

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