Coronavirus Update: Credit card providers may have temporarily stopped offering credit cards to customers due to the current Coronavirus (COVID-19) pandemic. This may result in a limited choice available to you.
Last updated October 2020
A business credit card may look and operate like a regular card, but it’s in the business’ name rather than a person’s name.
A business credit card can be used by company directors, employees, sole traders, self-employed and freelancers to make purchases for the business. The business is then responsible for repaying the balance. A company credit card can be used for business expenses such as office supplies or travel costs.
Business credit cards work in the same way as other credit cards. The only difference with a commercial credit card is that the purchases you make should solely be for the business.
The business will have to make payments on the credit card, ideally in full each month to avoid interest.
One of the main advantages of having a business credit card is that it can lend a much-needed helping hand to support your business. If you are struggling to purchase supplies or stock, for example, a commercial credit card can help you grow your business faster.
Businesses often suffer from cash flow problems, whether due to unpaid invoices or mismanagement of funds. A business credit card can help you manage cash flow and cover expenses until you get back on your feet.
Another great benefit of getting a business credit card is that you can easily separate debts and purchases from personal ones. Using your personal credit card to pay for business purchases can get a bit confusing, especially when it comes to filing tax returns. A company credit card allows you to keep personal and business finances separate.
Some other advantages of using a business credit card include:
There are also some important disadvantages to be aware of if you are thinking of opening a new business credit card.
The main thing that trips people up is unmanageable debt. A credit card is a convenient way to make purchases, but if not used wisely, the credit card debt can quickly get out of control. With typically larger credit limits, the potential to run up a high level of debt is a real risk to be aware of with business credit cards.
Remember: If you’re a small business or are self employed and are struggling with business debt, you can get free business debt advice from the Business Debtline.
Using a credit card to bridge cash flow problems is helpful, but if unpaid invoices start building up, you may not be able to pay your balance off each month. This can lead to high levels of interest to pay off.
Some other disadvantages of a business credit card to be aware of include:
Remember: If you’re looking for help to manage cash flow issues, another alternative is to take out a business loan which will have a fixed interest rate and more manageable loan terms.
If you’re self employed, a sole trader or freelancer in the UK, it’s always a good idea to keep personal finances away from your business finances. Although there are no specific ‘credit cards for the self employed’, the majority of card providers will consider your application.
We have listed out some frequently asked business credit card questions.
Many business owners find company credit cards useful for a number of reasons. If you wish to keep your personal and business credit separate, manage cash flow or reduce time spent on employee expenses, then a credit card may be worth getting.
Yes, it can. When you apply for a business credit card, providers may check your personal credit score, especially if you're a new business applying. Also, if your business falls behind on payments, it can negatively impact your personal credit score, so keep this in mind next time you put an expense on your company credit card.
A business credit card is available to all UK registered businesses from new start-ups to the self-employed. However, not all cards will be available to you as there will be certain requirements your business has to meet. For example, some providers may need your business to turn over a certain amount per year to qualify. It’s always good to check the provider's eligibility criteria before applying.
Yes, there are startup credit cards that are designed for new businesses. If you are a startup without much business credit history, you may find it more difficult to get accepted. Lenders may offer you a lower credit limit or higher interest rates in this case.
This depends on the card and bank you go with. Many business credit cards will charge annual fees or a percentage on transactions. Some cards may also have introductory offers which make the card free for the first year.
Providing payments are made on time; a business credit card can help build your credit history and improve your credit score.
If your business has bad credit, it may be a little bit more challenging to get a credit card. However, some providers will welcome companies with poor credit history but expect higher rates and lower credit limits.
Improving your credit score before you apply will benefit your business. It will open up a wider selection of credit card products and give you access to better rates. Find out your credit score and ways to improve it for free at Credit Passport.