Business Credit Cards Explained

Business credit cards
When you’re running a business, there are a lot of financial considerations that you need to be aware of and think about, and a business credit card is just one of those.

A business credit card can be helpful to your company in many ways, including helping your business to build up its credit history so that it can benefit from cheaper borrowing in the future.

In our guide below, we explain everything you need to know about business credit card eligibility, what you need to know when it comes to comparing credit cards, plus how to find the best startup business credit cards for you and your business.

What is a business credit card?

A business credit card works just like a personal credit card, but it is used for purchases associated with your business. 

How does a business credit card work?

You’ll be given a set credit limit in which you’re able to spend up to on the business credit card and you will be required to pay off the balance in full at the end of each month.

You can use the business credit card to make purchases and cover your business expenses such as office equipment, stock purchases and more.

As long as you can meet the minimum payment required each month, you will help build up a good credit history for your business. Failure to meet the minimum payments each month will likely mean that you’ll be charged interest and over a while, this could affect your business’ credit history if you can’t prove that you’re able to make the repayments.

Read more: Why is your credit score important?

Is it worth having a business credit card?

Determining whether it’s worth having a business credit card or not depends on how financially responsible you are and whether you think it will help to grow your business.

If you get a business credit card and then you’re unable to meet the credit card repayments, you could end up getting into credit card debt with your business which could put you in a tricky financial position.

However, if you’re smart with your spending and you want a way to build up your business’ credit history, then getting a business credit card can help you to make necessary purchases for your business and build your credit history at the same time, providing that you make the repayments on time and in full.

What credit score do you need for a business credit card?

The exact credit score that you need for a business credit card will differ depending on which credit reference agency the credit card provider obtains your score from, but you can expect to need to have a credit score of ‘good’ or ‘excellent’.

With Experian, this equates to a credit score of around 670 or higher.

How to build business credit fast

There are several ways you can build business credit fast, including:

  • Registering your business with the relevant entity.
  • Open a business bank account.
  • Ensure you have an established and dedicated business address and phone number.
  • Always pay all your business-related bills on time and maintain good credit with all your suppliers.
  • Get an Employer Identification Number (EIN).

Can a business credit card affect my personal credit rating?

Your personal credit rating won’t always be affected by getting a business credit card, particularly if you can keep up with the regular repayments.

However, it usually depends on the credit card provider and you might find that your personal credit rating could be affected if you fall behind on your repayments.

Read more: What factors affect your credit score?

Can you apply for a business credit card without a business?

It seems silly to think about getting a business credit card if you don’t have a business, but business credit cards usually come with much better rewards and bonuses than typical personal credit cards.

The good news is you don’t have to have a “traditional” business in order to qualify for a business credit card. For example, you could get a business credit card for the following:

  • Tutoring
  • Buying and selling antiques
  • Running a dog-walking business in your neighbourhood
  • Selling on Etsy or Facebook Marketplace
  • Buying and selling on eBay

The best business credit cards

When it comes to finding the best business credit cards, ensure that you compare cards from different providers and check the APR of each card before making a decision.

Below, you can find some of the most highly rated business credit cards. 

  • Barclaycard Business
  • Bank of Scotland Business Credit Card Mastercard
  • HSBC Commercial Credit Card Visa
  • Lloyds Bank Business Credit Card Mastercard
  • Santander Business Cashback Credit Card Mastercard

Is your credit score checked when applying for a business credit card?

Most providers will likely perform a hard credit check on you when you apply for a business credit card, which means the credit check will show up on your credit report and future lenders will be able to see that you’ve applied for a business credit card. 

If you’re accepted for a business credit card, then this isn’t really a big deal, but if you’re rejected, then it could negatively affect your credit score, thus making it more difficult for you to obtain credit in the future.

How to manage both personal and business credit sensibly

Building and managing both personal and business credit sensibly works the same for both types of credit.

You must remember to:

  • Use your credit card little and often.
  • Always try to pay back the full amount each month.
  • Avoid making too many credit applications in one go.
  • Ensure that you’re registered on the electoral roll.
  • Don’t make purchases on either your personal or business credit card that you can’t afford to pay back.

Managing personal and business credit will likely take a bit of practice as you’ll be responsible for the repayments of both credit cards.

Providing that you’re sensible with your spending and you can ensure that you can make the repayments, you should be able to manage both types of credit well.

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