91Ï㽶»ÆÉ«ÊÓƵ

You can use a business credit card for various purposes: covering an unexpected bill, making one-off purchases or paying for emergencies. However, you can also use it to benefit your business in ways you may not have foreseen, from building your business credit score to maximising rewards. Whatever your original intentions, this guide offers tips to help you get the most out of your business credit card.

Key takeaways

• Spend within your business’s means by setting a responsible limit that you can maintain

• Always keep up with monthly repayments, even if it’s just the minimum amount 

• Clear the balance in full each month to avoid paying interest

• Choose a card that offers rewards your business can benefit from

What can I use a business credit card for?

A business credit card can serve various purposes in your business, including:

• Business expenses: Pay for travel, office supplies and utility bills 

• Cash flow management: Plug short-term cash flow gaps until income arrives

• Employee expenses: Issue cards to your employees for their business-related purchases

• Credit score management: Use the card responsibly to improve your business’s credit score 

• Rewards and benefits: Earn cashback, discounts on business-related purchases or air miles 

Remember, any spending on your business credit card accrues interest unless you clear the balance before the statement is due, much like a personal credit card.

How do I use a business credit card?

You can use a business credit card in several ways to maximise its benefits. Let’s explore these in more detail.

Set a responsible limit

Business credit cards can offer higher credit limits than personal credit cards. While this can be helpful as your business grows, it also comes with risks. Uncontrolled business spending can be just as damaging as uncontrolled personal spending.

When applying for a business credit card, you can request a specific credit limit. Before doing so, carefully consider your business's actual needs. For instance, if you need £20,000 for machinery, a £15,000 limit won’t be enough. However, if your business is new and you’re unsure about maintaining a steady monthly income, requesting a high credit limit may not be the best choice.

In either case, avoid maxing out or frequently using a large portion of your credit limit. Using a high percentage of available credit consistently can harm your business credit score, as lenders may start to view you as a high-risk borrower. The amount you have available versus the amount you use is known as your credit utilisation ratio. Ideally, aim to use no more than 30% of your available credit at any time.

Use it for business spending

Only use your business credit card for business spending. This keeps your business and personal finances separate, which simplifies accounting, tax returns and potential HMRC audits. It also helps you spot cash flow gaps and financial shortfalls more easily. 

If you're a sole trader, using a business credit card for personal spending isn't illegal, but it can lead to problems, such as losing track of finances, which can affect your business’s cash flow.

If you run a limited company, which is a separate legal entity, you must keep personal and business finances separate. It is a legal requirement to do so.

Keep up with repayments

As with a personal credit card, keeping up with business credit card repayments is essential. Doing so helps grow your business credit score, which is important for future lending applications, such as business loans.

Falling behind on payments can negatively impact you and your business. It may damage both your personal and business credit scores, and if you continue missing payments, lenders can seize business assets as part of their reclaim process, affecting your operations. 

Staying on top of repayments is crucial for maintaining both your business and personal financial health.

You can repay a business credit card in several ways:

Pay the full amount: Clear your balance before the statement is due to avoid paying interest

Pay a set amount: Choose a specific amount to repay. It cannot be less than the minimum amount 

Pay the minimum amount: Your credit card statement shows the minimum amount you must repay each month

Enjoy rewards

Many business credit cards offer rewards and perks for spending. Potential rewards include:

• Cashback

• Air miles

• Discounts on essential business items, such as digital advertising or office supplies

• Travel perks, such as access to airport lounges

Not all cards offer the same rewards, so choose a business credit card that provides the rewards you actually want. For example, if you're a nutritionist who offers 1:1 guidance sessions over Zoom, you likely don’t need a business credit card that offers air miles for business-related travel.

Some cards also charge an annual fee, which could mean you’re paying for rewards that you don't actually use. Research the rewards available and choose the card that best fits your business needs. 

Review your statements

It can be easy to glance at monthly credit card statements and move on, but this approach can be risky. Stay vigilant with your business spending, especially if you’ve issued cards to employees.

Allowing staff to make purchases on behalf of your business saves time on authorisation requests and expenses administration, but it’s your responsibility - or your accountant’s - to reconcile their spending. If you ignore the details, you might miss errors or issues. 

Statements also help you monitor overall spending, which is essential for budget forecasting, and can highlight potentially fraudulent activity. Taking a methodical approach to reviewing statements promotes good financial discipline in your business. 

Check offer limitations and remember to allow for fees

Your business credit card might include an introductory offer, like 0% interest on purchases or balance transfers. While these offers are less common than on personal credit cards and typically come with shorter durations, they are still available.

When the offer ends, interest rates and fees can immediately affect any outstanding balance. To avoid surprises, review the terms carefully and set a reminder for the expiration date. This way, you can plan ahead and avoid paying unnecessary interest.

Also, check the fees associated with the credit card. Some cards charge an annual usage fee, which adds to the overall cost. If you're unclear about these fees, they may come as an unpleasant surprise when they appear on your statement.