All About Business Credit Cards & Reward Credit Cards

A business credit card gives you access to access to extra funds at a moment’s notice. Use them to cover business expenses and earn rewards when you spend! Cash advances could cost you more though. Read on to find out more.

Why would you use a business credit card for all, or some of your business finances?

A business credit card is, essentially, an on demand, pre-approved loan, which allows you to borrow up to the limit on the card at a moment’s notice.

By carefully selecting credit card providers, UK businesses can give themselves ready access to funds to pay suppliers, pay for business services, utilities and fuel, or to book business travel.

But business credit card providers may offer additional benefits as well. They allow a business to track purchases made for the business, keeping them separate from personal purchases. A credit card statement may be sufficient for accounting and tax purposes, relieving a business of the burden of keeping and filing receipts.

A corporate credit card can be provided to staff to make purchases, such as fuel or raw materials, eliminating the need to provide them with petty cash or cheques.

Credit cards also allow a business to make purchases more easily. Merchants who may not accept a cheque as payment will often accept a credit card instead. Credit cards can also be used easily for online purchases and payment of bills, including utilities and government fees.

Business credit cards may also allow you to collect air miles, reward points or cash-back on purchases. Read the details of card offers closely and consider how you will use the card to determine which benefit may be right for your business. In some cases, a no fee or low fee card without benefits may be best.

How do business credit cards work?

Business credit cards are functionally similar to the personal credit cards you may already have. The main business credit card companies are Visa, Mastercard and American Express. There are other credit card companies as well, such as JCB in Japan and Discover in the USA. It is important to get a card that will be accepted where you intend to use it.

Credit card companies maintain payment networks and ensure the payment systems work. They do not issue cards. Cards are issued by licensed credit card providers, such as banks, credit unions or specialist issuers. These companies issue cards branded with the logo of one of the credit card companies and are authorised to work on their network.

The main difference, of course, is that the card is issued to the business. A card account may have multiple cards connected to it. For example, the managing director, director of sales and director of marketing may all have a business credit card linked to the same card account. Purchases made on any of the cards will apply against the joint limit they all share.

When you make a purchase, the seller’s credit card POS machine communicates with your business credit card provider’s system with details about the purchase. If your card is in good standing and has enough available credit to cover the purchase, it will be approved. If not, it will be declined.

Your credit card supplier will keep a record of the transaction and issue you a monthly bill for the transactions, called a statement. The details can get a bit more involved, but that’s the short version.

Once your business receives the statement, you can pay the statement in full on or before the due date and you will not be charged interest on your purchases. If you do not pay in full by the due date and carry a balance forward, you will be charged interest on the entire balance. If you purchased £3,000 of items but only pay £2,500, carrying a balance of £500 forward, you will be charged interest on the full £3,000.

If you use the credit card to take a cash advance or purchase certain ‘near-cash’ items, such as traveller’s cheques, you will usually be charged a cash advance fee and interest from the time of purchase until the balance is fully repaid. Cash advances may have a higher interest rate than purchases and have no interest-free grace period. They also do not earn air miles, reward points or cash-back.

How long does it take to secure business credit cards?

There are a number of credit card suppliers offering business credit cards. These include RBS, HSBC, NatWest, Barclaycard, Capital On Tap and American Express.

A credit card application may be approved in minutes or it may take several days. A good credit history is usually necessary for approval; however, some providers do offer secured cards, which allow new businesses and those with mixed credit histories to obtain cards.

What type of security do I need for a business credit card?

Most credit cards are a form of unsecured credit. If you have a good credit history, you will not need to provide security. However, some credit card providers do offer secured credit cards. These require you to provide an amount equal to your desired credit limit. The security is held by the issuer and is forfeited should you not pay your bill. If you pay your bill regularly and on time, you can improve your credit history and qualify for an unsecured card.

Using a business credit card to cover business expenses?

Credit cards are a great choice for managing business expenses. They provide transparency, convenience, security and offer a readily available form of cash flow.

You can issue a credit card to every employee that needs one for business purposes and manage them centrally. It’s usually better to issue employees with separate accounts with their own cards, rather than joint accounts.

A joint account has multiple cardholders on one account. If anything goes wrong with the account (such as fraud on one card) every other card on the account gets shut down because the account is compromised. However, if all staff have a separate account with their own card, fraud on one means only that one is shut down, while others are unimpeded.

With multiple cards, the business can also specify different spending limits. That means the head of sales, who needs to travel, stay in hotels and pay for client entertainment, has a higher credit limit than an admin worker who simply needs to top-up office supplies.

Credit card limits will likely be considered debt if you are applying for other finance sometime in the future. If your business has multiple cards totalling £60,000 in limits, that is £60,000 of potential debt. Be aware lenders will consider this if you ever apply for other types of borrowing.

What are the benefits of using business credit cards for expenses?

One of the big benefits of using a credit card for business expenses is that it centralises and simplifies the management and processing of transactions. So rather than having to deal with mountains of receipts and claims on a monthly or quarterly basis, a business can issue as many cards as needed to staff and oversee all expenses through a single online dashboard.

A second benefit is that the business doesn't have to hand over actual cash to its staff. No petty cash vouchers or receipts to deal with means less administrative overhead for the finance department. It also means greater peace of mind. Lost credit cards can be replaced at no cost. Lost cash is money down the drain.

Another advantage of using business cards, rather than bank transfers, cheque or cash, is that under certain circumstances, you can be reimbursed for fraudulent charges. Say you ordered machinery parts and what was delivered was not as described, or nothing was delivered at all, then you can usually get the charge reversed. A dispute regarding the quality of the goods or services is not usually grounds for a reversal.

Finally, business credit cards are useful for cash flow. You have access to funds within your credit limit at any time. However, business cards should always be paid off in full and on time to avoid incurring interest, which is usually higher than other types of borrowing.

What can I expense to a business credit card?

You can use a business credit card to pay for most business expenses.

One of most common types of business expense is travel. Before you travel you should find out the fees for foreign exchange transactions on the card. Some cards don't charge at all.

Other common uses for business expenses include vehicle fuel, car rental and hotel accommodation. If you use your card for vehicle rental or for a hotel stay, bear in mind that you may need a larger limit to allow for pre-authorisations. This means the organisation puts a hold on part of your credit limit to cover additional costs such as damage to the car or use of the hotel minibar. You may, for example, have £500 of your limit held by the hotel. However, once the actual payment is processed after check out, this would change to the actual charge for the room.

It can take a couple of days to process the charge and the real charge amount to be posted to your account. With this in mind, business expense cards should be for a higher limit than the actual cost of the goods and services you need to charge.

Suppliers usually prefer to invoice for goods and services, rather than accept cards.

What’s the best credit card to use for business expenses?

Businesses have a lot of choice for credit cards. Shop around and find the best deal for you. Many websites offer comparison services to help you choose.

Consider what is of most benefit to your business. If travel is a big deal for your organisation, then consider a card that charges zero for foreign transactions. If you regularly need to buy expensive equipment you might want to go for a card with a high limit and lower interest rates.

Many business credit cards offer rewards such as frequent flyer miles, travel insurance or cash-back. Make sure the benefits outweigh the sometimes-high fees.

Can a personal credit card be used for business expenses?

You should avoid using a personal credit card for business expenses, and likewise business credit cards should not be used for personal expenses.

Using a business credit card for personal expenses muddies the waters for accounting purposes; furthermore, the credit limit on personal cards may be too low to be effective for business purposes.

In addition, any personal finance issues you may be experiencing may affect your business finances. Always keep a clear delineation between business and personal finances.

Why would you use a business credit card with rewards?

Credit cards are a common go-to form of finance for small businesses; a kind of pre-approved loan that’s easy to draw upon when you need finance.

Business credit cards are what the name suggests: A credit card account associated with a business rather than an individual’s personal account. They let businesses track purchases across the organisation and the statements may be sufficient for accounting and tax reporting, and in many cases, remove the need to manage petty cash.

You can also choose to have a card account with multiple cards associated with it. This means that more than one member of staff can have their own separate card but all purchases will apply against the same shared credit limit.

You can read more about how business credit cards work in our guide.

However, many business credit cards offer more, in the form of rewards and perks. Just as your personal credit cards may offer you air miles or cash-back on purchases, so do business credit cards.

The idea is simple: The more you purchase using the card, the more rewards you receive in return.

What kinds of rewards are on offer?

Business credit cards come with a wide range of rewards, some of which are linked to the specific retail or services offerings of the organisation supplying the card.

Frequent flyer points are synonymous with credit card rewards. The premise is simple: Each time you use the card to make a purchase, you earn points or “miles” towards air flights. Before you sign up, always check whether your rewards tie you into a particular airline or whether you can redeem them more widely.

Some corporate credit cards with rewards let you claim points against purchases that can be redeemed in specific stores. These rewards are commonly from credit cards issued by High Street retailers or supermarkets. In addition, some new card deals might offer a sales voucher for signing up that can be redeemed for goods or services.

Other business rewards cards may offer rewards that seem less like perks but may prove more beneficial to your business over time. For example, if you’re applying for a new card and transferring an existing balance, a card that offers a long period of zero per cent interest on transfers or new purchases may be a better fit for your business than store points or vouchers. This kind of deal offers companies an affordable route to pay off a balance over a longer time period.

You can also consider a low-fee business rewards card for your organisation. These offer cheap access to finance for a small fee – and in many cases credit card suppliers waive the first 12 months of fees due.

Other kinds of rewards can include cash-back, concierge services, complementary travel insurance, discounts on hotels, discounts on office equipment, corporate entertainment or access to airport business lounges.

How do I choose the best business rewards card for my business?

Always remember to balance out the benefits from rewards with the wider considerations of your business needs.

For example, if you’re paying a lot of interest against a high overall balance, then this is likely to outweigh the benefits gained from frequent flyer points or travel insurance perks. In this example it might be more prudent to choose card with a lower APR rather than rewards or a card with a long interest-free period.

However, if you have a business where you or other members of the workforce need to travel overseas, then rewards in the form of frequent flyer points may prove valuable.

Always take an overall view of what’s on offer and don’t get caught up by the short-term gains some cards offer.

Many websites offer regularly-updated, comparative reviews of the business credit cards available. These deals are available from a wide range of suppliers, including banks such as HSBC, Lloyds, NatWest and RBS, to branded offerings from retailers like Asda, Marks & Spencer and Tesco.

How long does it take to secure a business reward card?

Card applications can take anywhere between a few minutes to several days. A good credit score comes into play here, although card deals are available for businesses with a mixed credit history.

What type of security do I need for a business credit card with rewards?

Business credit cards are typically a kind of unsecured finance, although you will need to have a good credit score to be considered for some of the best deals. If your credit rating is less than stellar you may have to apply for a secured credit card. 

What costs are involved with any of the business credit cards above?

Credit card interest rates tend to be much higher than other types of borrowing. All credit cards carry a cost to the business; research them thoroughly. Consider the annual percentage rate (APR), which will include the interest rate as well as any fees payable. Check whether additional fees apply for late payment or exceeding the credit limit.

Most business credit cards have an annual fee, although some suppliers waive this fee temporarily for new cardholders.

In addition to interest and annual fees, other common fees are cash advance fees, foreign exchange fees (which apply to transactions made in a different currency than the one the card is denominated in), late payment fees and over limit fees. Check the details carefully for any card you are considering applying for.

Useful links

How your credit score can impact your business finance