business credit card

A business credit card is like a personal credit card. Indeed, excellent when you opt to delay payment for big-ticket items or several goods for as long as a month.

Moreover, It is very useful, especially by small and medium-sized entrepreneurs, in managing the overall finances of their business. Hence, the statements of balance you will regularly receive from your card lender. Then, the lender will give you a constant reminder of your remaining credit and a picture of your monthly spending.

A business credit card also separates your personal spending from that of your company. Thus, it is highly reliable and assuring you will not be misusing the company funds. Even though your employees make direct purchases from the company account, you can still monitor the spending.

Thus, the application process for a business credit card also differs slightly when applying for a personal credit card.

How to secure approval for business credit card?

Business credit cards are unsecured, meaning the eligibility criteria may be quite stringent insofar as your credit rating is concerned. If it’s a new business that needs more years to gain a satisfactory credit score, lenders will look into your personal creditworthiness instead.

Some banks also take into account your business’s financial strength. Subsequently, they measure through its turnover and profit. But there are bank that offers credit cards if you open an account with them. You may process account opening either in a bank branch or, more easily, online.

Credit limits vary, ranging from £500 and to as much as £25,000. Accordingly, both the creditworthiness and business stability will lenders in estimating how much you can afford to repay. After all, lenders use it as a guide to determine the credit limit that would be appropriate for you.

What are the benefits of business credit card?

Consequently, there are additional flexibilities and attractive rewards that lenders offer. But, these are often subject to your business status and how consistent you are in making timely payments. These include:

0% purchases: all card providers flaunt this benefit, but this benefit typically lasts only for a certain period, usually close to two months.

Cashback: your business might retrieve a small portion of the money you spend each year if you pay if full or earlier than the payment deadline.

Shopping discounts and reward points: discounts may apply for purchases made with select merchants whom your credit provider tied up with. Besides discounts, you can also be entitled to shopping points which you can earn and use for a future purchase at any merchant-partners.

Air miles and travel insurance: these useful in reducing the overall cost of your trip especially if you or your employees often travel for business.

What are the costs?

Besides interest rates, business credit cards slap additional fees such as:

Annual fees: some impose this only after a one-year introductory period. Indeed, common for travel and rewards credit cards, making it worthwhile if you know how to maximise the privilege that comes with your credit card.

Late payments: all lenders slap this fee, serving as a fine for delayed or partial payments.

Exceeding your credit limit: most lenders also impose this fee, exactly why you should try to renegotiate the cap with your credit card provider once you feel the need to down the road.

Inactivity fees: also known as dormancy fees, this is calculated in consideration of the months or years your card has fallen into disuse.

Cash withdrawals: credit cards are used for making a direct purchase, but business credit card also allow for cash advances in that you withdraw money like you would with an ATM/debit card. But this means additional cost.

Foreign transactions: using your business credit card when abroad on a business trip usually translates to extra charges.

After all, if you get mixed up in calculating the total cost of fees associated with a credit card, you can always simply check the representative annual percentage fee (APR) which is disclosed by all lenders. Hence, APR estimates the total additional cost you would incur from the payment of interest rates and from all fees and charges. It’s worthy to note, however, that APRs vary depending on your business.

Comparing loans

Lender’s name Credit limit Representative APR (all may vary depending on business type) Maximum period of interest-free perk on purchases Other fees
Capital on Tap £50,000 39.9% 56 days Late payment fees

Eventually, not disclosed on website
Clydesdale Bank £1,200 22.4% 59 days Cash advances: 3% (minimum £3.00)

Copies of statements or vouchers: £5

Non-sterling transaction fee: 2.95%

fee of 3% (minimum £3.00) of cash

Late payment or over-limit fees: £12
HSBC £25,000 22.% 56 days Non-Sterling Transaction fee – 2.99% of the sterling amount of the transaction

Cash Fee – 2.99% of the amount advanced, minimum £3

Fees Annual fee £32
Metrobank Subject to business status 14.9% 56 days For card purchases outside Europe, 2.99%
        non-sterling transaction fee non-sterling transaction

£1.50 non-sterling purchase fee
TSB Subject to business status: £10,000 17.6% 45 days Cash withdrawals: 2.5% handling fee (minimum £

Late fees, returned payments and over-limit fees: £12

Loan tips

Before applying for a business credit card, there are some essential things to know and consider.

No consumer credit protection: Certainly, business credit cards are not covered under the Consumer Credit Act. Therefore it does not enjoy the perks and means of protection accorded to personal credit cards. So if you make a £100 to £30,000 worth of purchase under a business account and the items are not delivered or are faulty, you are not entitled to a refund which you would have been given if you bought it through a personal credit card.

More costly if you have a patchy credit rating: while credit profile is the ultimate eligibility criterion for credit card providers, some can still accept those with poor credit profiles but on the terms of higher interest rates or a lower credit limit.

All your suppliers should accept credit card payments: Eventually, some may only accept invoices and bank transfers.

A good step to earning good credit: Emphatically, responsible for handling a business credit card will result in a better credit rating. Thus, essential if you want to secure financing more easily in the future.