Business credit cards

A business credit card lets a company buy now and pay when the monthly statement falls due, with interest charged on any balance carried beyond that date. The company is liable for the debt, and a director can be too through a personal guarantee or joint liability. Section 75 of the Consumer Credit Act does not cover a card issued to a limited company or LLP.

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How a business card works for a company

The card account is opened in the company's name. The issuer sets one credit limit for the account and can issue cards to directors and staff, each with its own spending limit inside it. Each month the issuer sends a statement for the whole account, with a due date and a minimum payment. On cards that give a grace period on purchases, paying the statement balance in full by the due date means the company pays no interest on that month's spending. Pay less and interest runs on what is left.

The issuer sets the limit from the company's accounts, its bank turnover and its credit file, and may also search the directors' personal credit files. A young company with thin accounts may be offered a lower limit or asked for a personal guarantee.

Cash withdrawals and money transfers are priced differently from purchases on many cards, with a fee on each and interest from the day of the transaction. Spending in another currency carries a foreign exchange fee on many cards. Read the pricing terms for each type of transaction before you apply.

For a sole trader, or a partnership of two or three partners, a card with a limit of £25,000 or less is regulated consumer credit. The funding search here covers limited companies, LLPs, and sole traders and partnerships borrowing more than £25,000. A smaller sole trader can apply to its own bank, and someone starting out can look at Start Up Loans.

Who is liable for the balance

Company liability
The company alone owes the balance. If the company cannot pay, the issuer is an unsecured creditor of the company, and the directors owe nothing on the card unless they signed a document that makes them liable.
Joint and several liability
The company and each cardholder are liable. The issuer can pursue a cardholder for spending on their card if the company does not pay.
Personal guarantee
A director promises to pay the company's card debt if the company does not. The promise survives the company: if the company fails, the issuer can claim from the director personally, up to any cap the guarantee sets.
Charge card
The full statement balance must be paid each month. The company gets credit for the length of the statement cycle, and a missed payment can bring a fee and suspension of the card.

Look for the words jointly and severally, and for any guarantee, in the agreement before you sign. What a personal guarantee means for a director covers what you would be signing, and the personal guarantee cover calculator works through insuring it.

When section 75 applies to a business card

Section 75 of the Consumer Credit Act 1974 makes a card issuer jointly liable with the seller when goods or services bought on the card are not supplied or are misdescribed, for a single item with a cash price over £100 and up to £30,000. It applies only to a regulated credit agreement. A regulated agreement needs a borrower who counts as an individual: a person, including a sole trader, a partnership of two or three partners who are not all companies, or an unincorporated association that is not made up entirely of companies.

That gives four cases. A card issued to a limited company or an LLP is not a regulated agreement, and the Financial Ombudsman Service has decided complaints on that basis: section 75 does not apply. A card issued to a sole trader, or to a partnership of two or three partners, with a credit limit of £25,000 or less is regulated, and section 75 can apply to purchases within the price limits. The same card with a limit above £25,000, taken out wholly or mainly for the business, falls under the business exemption in article 60C of the Regulated Activities Order, and section 75 does not apply. A partnership of four or more partners falls outside the definition of an individual altogether.

A company card still has the card scheme's chargeback process, which comes from the schemes' own rules. The issuer asks the seller's bank to reverse the payment, within time limits the scheme sets, and the seller can contest it. Raise a dispute with the issuer as soon as you know a purchase has gone wrong.

The ban on card surcharges that took effect on 13 January 2018 does not apply to commercial cards, so a seller may add a charge when you pay with a business card.

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Cards as short-term working capital

A card limit is revolving credit: what you repay becomes available to spend again. Used for stock or supplies that the business sells or bills before the statement is due, it gives the company the time between purchase and due date to collect its own money, at no interest if the balance is cleared.

The arithmetic changes once a balance is carried. Interest is charged every month on the balance left after the due date, at a rate the issuer sets for the card. A balance the business cannot clear for several months is borrowing for a longer purpose, and a business overdraft, a revolving credit facility or a term loan may price it differently. If the shortfall comes from customers paying late, invoice finance borrows against the invoices themselves.

Cards also carry information. Each cardholder's spending arrives as a line on the statement and, on many cards, as a data feed into accounting software. Set a limit for each cardholder and block categories the business does not buy.

What carrying a balance costs

Illustrative example

A company buys £15,000 of stock on its card ahead of a busy season and pays only the interest each month for three months, at an assumed card rate of 2% a month.

Balance carried
£15,000
Card interest, month 1
£300
Card interest, month 2
£300
Card interest, month 3
£300
Card interest over three months
£900

The same £15,000 drawn on an overdraft at an assumed 12% a year for three months costs £450 in interest. Cleared in full by the first due date, the card charges £0 interest on the purchase.

Before you apply

Questions people ask

Am I personally liable for my company credit card?

Only if the agreement makes you liable. A card in the company's name with company liability is a debt of the company. If you signed a personal guarantee, or the card is set up with joint and several liability for cardholders, the issuer can ask you to pay when the company does not, including after the company has failed. Read the agreement before signing, and see what a personal guarantee means for a director.

Does section 75 cover a business credit card?

Not when the card is issued to a limited company or LLP, because the agreement is not a regulated credit agreement. It can cover a card issued to a sole trader or a partnership of two or three partners, where the credit limit is £25,000 or less, for a single item priced over £100 and up to £30,000. A sole trader card with a limit over £25,000, taken out for the business, is exempt. Chargeback under the card scheme's rules remains available.

Does applying for a business credit card affect my personal credit score?

It can. Issuers may search the directors' personal credit files as well as the company's file when you apply, and a search may be recorded. Whether the card account then appears on your personal file depends on the issuer and on whether you are personally liable for the balance. Ask the issuer which searches it runs before you apply.

What is the difference between a business credit card and a charge card?

A credit card lets the company pay part of the balance and carry the rest, with interest. A charge card requires the full statement balance each month, so it gives credit only for the statement cycle. A charge card suits a company that clears its card every month and wants spending control. A credit card gives room to spread a large purchase, at the card's interest rate.

Can a sole trader get a business credit card?

Yes. A sole trader's card with a limit of £25,000 or less is regulated consumer credit, with the protections that brings, including section 75. The funding search here covers limited companies, LLPs, and sole traders and partnerships borrowing more than £25,000, so a sole trader looking for a smaller limit should apply to its own bank or another card issuer directly.

Finance is subject to status and to the lender’s terms. A personal guarantee makes you liable for the company’s debt if it does not repay, and it can be enforced against your own assets, including your home. Nothing here is a personal recommendation.

Business savings

Business overdraft

A limit on your business current account, reviewed each year and repayable on demand.

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Revolving credit facility

A limit you draw, repay and draw again over a fixed term, with interest only on what you use.

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Working capital finance

How the trading cycle ties up cash, and which short-term finance fits each gap.

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What does a personal guarantee mean for a director?

Personal liability for the company's debt, and how to cover it.

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Funding searches run on Swoop’s platform. Swoop Finance Limited is a credit broker and not a lender, and is authorised and regulated by the Financial Conduct Authority (FRN 936513). Buzz Accounting Ltd introduces businesses to Swoop and may receive a fee from Swoop when funding is arranged. Business funding is separate from the financial advice Equity & General Financial Services Limited gives through this website. Finance is subject to status, and a lender may ask a director for a personal guarantee.

Cover for a personal guarantee

If a lender asks you to guarantee the company’s borrowing, our advisers can advise on life cover for that debt.

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