You can earn cashback or earn rewards on your business spending
Business credit cards can be used for your business spending to earn you rewards and cashback. They often come with an annual fee; however, a lot of them offer a free first year, so you can switch cards after a year if you don’t want to pay. Here are some of the best business credit cards available at the moment.
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Free business credit cards
Business charge cards
Business credit cards with an annual fee
Business credit cards explained
Who is a business credit card for?
If you run your own business, then you could benefit from a business credit card.
Anyone, from a self-employed sole trader to a company director, can get a business credit card, but not all sole traders will be eligible for all the cards on offer.
And you should always check if you’re eligible for one before you apply, however, there’s no guarantee you’ll get one if you apply.
Do you need a business credit card?
Credit cards can be expensive if they aren’t cleared each month by paying off the full balance. The interest added on top of anything left over will often cost more than getting a loan, so this isn’t a good idea.
Business credit cards can have benefits like rewards and cashback, which can sometimes be better than what’s on offer for personal accounts, however, these usually come with a cost. In addition, you may get Section 75 protection, however, this depends on whether you’re a sole trader or a ‘corporate business’, such as a limited company or partnership.
Does a sole trader need a business credit card?
If you’re a sole trader, then any credit card for your business is still a personal credit card. Applications will be based on your credit rating, and you’ll be personally liable for any debts you build up.
For this reason, most sole traders will probably be better off with a personal credit card that’s used just for business spending.
You can still take advantage of Section 75 cover, earn cashback with lower annual fees (if any), and even get fee-free spending overseas with some cards.
One of the few areas a business credit card is better for a sole trader than a personal credit card is that you might also get a much higher credit limit. That can help with large purchases. But of course, you need to be able to pay it back!
Section 75 protection for limited companies and partnerships
Section 75 doesn’t apply to these types of businesses. So there’s no added legal benefit to using a credit card in a company. Instead, you’ll need to use a personal credit card and claim the money back if you want to get this protection on purchases over £100.
However, if you run a limited company, it’s much cleaner to have spending made directly via the business rather than claiming it back as an expense. Particularly if you have any employees.
What’s the difference between a charge card and a credit card?
Some of the cards above are charge cards and won’t have an interest rate. These aren’t technically credit cards, as you have to pay the full balance every month. Meanwhile, a credit card lets you roll over a balance and will charge interest after a set period. Be careful which one you choose, as a credit card can make you accumulate debt, however, a charge card may charge you fees if you don’t repay the full balance within the set time provided.
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What you get with a business credit card
Additional cards
Most business credit cards will give you supplementary cards tied to the same account for your employees. This reduces your admin for expenses and helps you track individual spending. With some, you can limit the spending allowed per account.
Cashback and rewards
Another feature of business credit cards is earning rewards in the form of cashback or air miles. There are a handful that offer this on purchases. But these tend to come with a fee, which can wipe out most of the cashback you earn if you’re not a big spender.
You’ll need to calculate just how much you’re likely to earn in cashback after the fee to work out if they’re worthwhile. But say you spend £5,000 a year earning 0.5%, you’ll make £25.
Interest-free days
You’ll get a certain number of interest-free days with your business credit card or charge card, ranging from 42 to 59 days. This is how long you’ve got until a purchase will start to accumulate interest at the variable rate you’ve got with the card. Be sure to clear the balance within this timeframe to pay no interest on your purchases.