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A business credit card can be a useful financial tool for any business. Like a personal credit card, it gives you access to a line of credit up to a pre-agreed limit that you can use whenever you need to. 

You can use your business credit card to improve cash flow, pay for unexpected expenses or cover the cost of equipment and office supplies. 

This guide takes a closer look at why it can pay to use a business credit card, as well as the potential pitfalls. 

8 benefits of a business credit card

Business credit cards come with a range of benefits, as outlined below:

1. Manage your cash flow

Business credit cards can act as a financial safety net. You can pay for expenses throughout the month and take advantage of a grace period that allows you to avoid paying interest on your borrowing until your next payment date.ÌýÌý

2. Keep personal and business expenses separate

Using a business credit card keeps your business and personal finances separate, making it easier to file company accounts and tax returns as there’s no crossover.

3. Access to emergency funding

If your business needs to pay for equipment repairs or an unexpected bill, a business credit card gives you access to the funds you need there and then. This can be essential when keeping your business up and running.

4. Rewards and perks

Some business credit cards offer rewards such as cashback on your purchases or travel incentives, such as access to airport lounges or fee-free spending abroad. 

5. Boost your business credit rating

Using a business credit card enables you to build a business credit score*. This can help you access more credit in the future, such as a business loan. Having a good credit score can also make your business more attractive to investors and suppliers. 

*Note that if you’re a sole trader, you won’t have a business credit score as there’s no legal distinction between you and your business. 

6. Personalised spending controls

Some business credit cards permit you to have multiple users linked to one account. This means you can give cards to your employees to help them manage their business expenses, without the need to reimburse them. Often you can set personalised spending limits on each card to prevent them overspending, and you can easily track what’s being spent where.

7. Higher credit limits 

Business credit cards generally offer much higher credit limits than personal credit cards, making them more suited to large expenses often associated with businesses, such as utility bills and travel costs. 

8. More professional

Using a business credit card to pay for your company expenses can make you look more professional. It can suggest to lenders, clients and investors that you’re credible and take your business seriously. 

Read more:

• Personal vs business credit cards

• How to get a business credit card

What are the disadvantages of a business credit card?

Although there are many benefits to having a business credit card, you should also be aware of the downsides. 

Less protection

Unlike personal credit cards, purchases made with a business credit card aren’t covered by Section 75 of the Consumer Credit Act. This legislation protects private individuals for purchases between £100 and £30,000 if something goes wrong.That said, many business credit card providers offer their own protections, such as fraud guarantees for online transactions and insurance against misuse or fraudulent activity.

Fees

Some business credit cards charge high annual fees, particularly those that offer perks and rewards. You should weigh up whether the fee is worth paying before applying for your business credit card.ÌýÌý

Fees also usually apply if you are late or miss a payment. 

High interest rates

Many business credit cards charge high rates of interest. Unlike personal credit cards, few business credit cards offer lengthy interest-free periods on spending. This means it can quickly become expensive if you carry a balance from month to month.

Could damage your business’s credit score

If you don’t make your repayments on time or you exceed your credit limit, you could damage your business’s credit score. This can make it harder to get credit again in the future.

Be aware that if you’re asked to sign a personal guarantee when applying for a business credit card, this means you become personally responsible for the debt if your business can’t repay it. 

Potential for overspending

Credit cards are easy to use, which means it can be tempting to spend on them unnecessarily. Building up a lot of debt that’s hard to repay can impact your business’s financial health. 

Is it worth getting a business credit card?

Using a business credit card can be hugely beneficial. It can improve cash flow and give you funds to fall back on as and when required. It can also help you to manage company expenses and benefit from perks such as cashback.

However, it’s crucial to use a business credit card with care. Interest rates can be high, so if you don’t pay off your balance in full each month, it can quickly become an expensive way to borrow. What’s more, if you miss or are late making a repayment, you risk damaging your business’s credit score. 

How to choose a business credit card

When choosing a business credit card, it’s important to consider whether the card charges any fees and how much interest applies if you don’t clear your balance each month. 

If you’re likely to carry a balance on your card, look for one with a low interest rate. If you’re thinking of applying for a card that charges an annual or monthly fee, consider whether this is affordable and whether the perks that come with the card make up for the fee. 

Other factors to consider include:

• Whether you need extra cards for employee expenses

• If a personal guarantee is required

• Whether your business can benefit from the rewards offered

• If your business meets the card’s eligibility criteria