What is a business credit card?

A business credit card is designed to be used for business purposes only. Business credit cards work just like personal credit cards, in that you can make purchases online and in-store and pay back the balance either gradually or in one go.

6 min read
Business man handing over his credit card to make a payment

How does a business credit card work? 

A business credit card is essentially a credit card that’s used by a business to pay for expenses and purchases.

It provides business owners with a way of separating their personal and business finances, which is helpful when it comes to accurate bookkeeping.

You use it in the same way as you would a personal credit card, but you may be able to get a higher credit limit on a business credit card. Generally speaking, interest rates may be higher on a business credit card than a personal card, but this is not always the case.

Who can get a business credit card? 

You can take out a business credit card if you are a:

  • business owner
  • sole trader or self-employed
  • an employee of a business

A business of any size can take one out – at least, in theory. There are cards designed for everyone, from start-ups and small-to-medium enterprises, right up to multi-national corporations.

No matter the size of your company, it will still be subject to a credit check on your business. If your business has a poor or thin credit history, some lenders may either require you to sign a personal guarantee.

Tip: It might be worth building up your personal credit history first if you have less-than-perfect credit. This will help you to get accepted and with better interest rates.

What is a business credit card used for? 

You can use a business credit card to:

  • make business purchases – you can also add employees onto the card as additional cardholders so that they can make purchases on your behalf
  • manage employee expenses – you can cap employee spending
  • build a company credit profile – by borrowing within your means and always making your repayments on time, you can boost your company’s credit score
  • get cashback and discounts – there is a range of benefits from different lenders out there. You normally need a good credit score to get offered rewards, and you may be charged extra for them

Just remember that if you don’t meet your repayment plan, you could end up being charged late fines and damaging your business’s credit score (and your own). This would hurt your company’s chances of taking out credit in the future.

Do I need a business credit card?  

You’ll need to consider the pros and cons of getting a business credit card carefully before making a decision. Here are some benefits that might apply to your company:

  • separate your finances out – a business credit card will help you to tell your personal and company finances apart, which makes bookkeeping easier.
  • build up your company’s credit history – a business credit card will help you build your company’s credit history (if you manage it sensibly), allowing you to access business loans, etc.
  • access revolving credit – you won’t get charged interest on your balance if you clear it in full before the end of the month, which can help if you need quick access to a small pot of cash.

Make sure you research the cons, as well:

  • credit checks are required – since the credit check is done on your business, start-ups and small companies may struggle to get accepted for a business credit card without a personal guarantee. If you are accepted, you may face higher interest rates
  • annual charges may apply – it’s likely that you’ll get charged an annual fee, but this depends on the lender. Annual fees should be included in the APR so you can compare the overall cost of different credit cards
  • you aren’t covered by Section 75 – this section of the Consumer Credit Act protects consumers if something goes wrong with their personal credit card purchase (between £100 and £30,000), but this doesn’t apply to a business credit card

How to open a business credit card 

Applying for a business credit card is simple. Follow the four steps below to find a card that suits your company.

1. How to qualify

You may need to build your business credit score first, depending on the card you want to apply for. This is especially true if your business has unstable or small revenue, but it will depend on the lender’s criteria.

Use an eligibility checker to see whether you’re likely to get accepted before you apply. Many banks also require you to be an existing customer, something which is worth considering.

2. How to apply

It may be possible to apply in branch, over the phone, online or even by post, depending on the lender. While each lender has different requirements, they will consider your company’s assets and what you can afford.

3. Do you need a credit check?

The lender will conduct a credit check on your business and potentially your personal credit report too. If you’re worried about passing the check, it may be worth looking for a card that considers your circumstances as a whole, not just your credit. Or look to increase your credit score before you apply to boost your chances of acceptance – and to gain access to more competitive deals.

4. What do you need to provide?

You’ll need to answer several questions, including (but not limited to):

  • what type of company you run
  • the name and address of your business
  • the business sector
  • when your company was established
  • how many employees you have
  • personal information, such as your name and address, for example

They will also ask you about why you want the card and what credit limit you’d like, so think carefully about this before you apply.

How much can I get on a business credit card? 

How much money you can borrow on a business credit card is known as your credit limit. The overall credit limit you are given will depend on your affordability and the lender’s other criteria.

Having a strong credit history should allow you to access a higher credit limit. But remember, credit cards should be used as a short-term option. Plus, it’s best to keep your spending under 30% of your credit limit, as this can help to boost your credit score by around 90 points.

How much do business credit cards cost? 

Costs you have to pay on a business credit card vary, but they may include:

  • annual fees
  • charges for exceeding your credit limit or not paying on time
  • interest, which can be higher than with a personal credit card

Am I personally liable for a business credit card? 

Your business is liable for your credit card, but you may become personally liable if your business falls behind with payments and you’ve already signed a personal guarantee.

A personal guarantee is a legal agreement that you sign to guarantee that you will make payments towards the credit card if your business can’t pay for whatever reason.

How long should a business keep credit card receipts? 

According to HMRC, you should keep your business receipts for at least six years.

Are credit card fees tax deductible for business? 

Yes, credit card fees are tax deductible on a business credit card. However, you should try to avoid incurring any charges in the first place by paying at least the minimum amount on time, every time.

Do business credit cards offer protection? 

While Section 75 doesn’t apply to business credit cards, some lenders offer other ways to protect finances. This could include insurance to cover unauthorised employee charges or fraud, or online guarantees to protect you from internet scams, for example.