Business credit card fees

What do all those confusing percentages and acronyms mean? How can you minimise their impact on your business finances? What are the dos and don'ts? We've got you covered.

Last updated:

Interest rate

This is the main thing you have to worry about if you’re planning to use your business credit card to borrow money for your business. If you clear your credit card balance in full every month, the interest rate won’t matter to you; but if your business occasionally needs some extra support and you do carry a balance on the card, the interest rate reflects how much you’ll be charged for borrowing.

While comparing business credit cards, you’ll see a lot of scary acronyms, jargon and percentages referred to interest rate, so here’s a little cheatsheet to remind you what means what:

  • AER (annual equivalent rate). This is the interest rate you’d be charged if you carried a balance on the card for one year: it does not include fees, but it does take into account compound interest.
  • Compound interest. If credit card interest is charged monthly, why are we always presented with the annual rate? Well, that’s because of compound interest, which basically means that if you don’t pay back your balance, you’ll be charged interest on interest, every month. It sounds weird, but it’s more logical than it seems. The whole explanation is on this page.
  • APR (annual percentage rate). You’ll see this pretty much on every credit card page. It represents the overall cost of a business credit card. It takes into account both the AER and any other ongoing fees, such as the annual fee.

If this sounds a bit complicated, hold on because we’re not done yet. Interest rates can be charged on different types of expenses and depending on your card, may differ from one another:

  • Purchase rate. This is the rate that new purchases made directly with the card accrue.
  • Cash advance rate. Don’t withdraw cash with your business credit card (or your personal one, for that matter). Just don’t. The rate is usually higher and cash advances normally start accruing interest from the moment they’re taken out (and not from the end of the billing cycle, like purchases).
  • Balance transfer rate. If you transfer the balance you’re carrying on your old credit card to a new one, this is the rate you’ll be charged. While many personal credit cards offer 0% deals on balance transfers, those aren’t really a thing when it comes to business credit cards. But it may still be worth doing a balance transfer if your business qualifies for a credit card whose rate is lower than your old one.
  • Promotional interest rate. A few business cards sometimes do offer a 0% introductory deal on purchases instead. This means that for the first few months (usually three to six) your purchases won’t accrue any interest at all. A promotional interest rate always comes with a revert rate, which is the standard purchase rate you’ll get once the intro period is over.

How to avoid it: The only way to avoid interest is paying your business’s credit card bill in full every month. If you often find yourself carrying a chunky balance on your business credit card, it may be time to consider other forms of business finance. Credit cards are a costly way of borrowing for the long term, so there may be a better deal for you out there.

Hannah's design shop savings on credit card interest

Hannah owns a design and jewellery shop in North London. She has a business credit card that charges 22.9% AER on purchases and uses it to buy £3,000 worth of raw materials. It takes her 3 months (after the end of the first billing cycle) to pay it back (£1,000 per month), which comes to £108 in interest. She often needs to spread the cost of raw materials this way, so she applies for a different credit card and gets a 15.9% AER on purchases. The same £3,000 purchase, divided into 3 instalments, will now only cost her £76 in interest (£32 less).

Annual fees

This is a fixed fee that recurs every year, no matter how much you use the card. Many business credit cards charge it, a few don’t, while some do but waive it for the first year in an effort to make the product more appealing to new customers.

The amount usually depends on the card’s features: rewards credit cards, for example, tend to have higher annual fees, but they make up for it with cashback, reward points or air miles. Other cards have higher annual fees because they offer significant perks, like airport lounge access or dedicated customer service.

How to avoid it: As we said, when it comes to business credit cards without annual fees, you aren’t exactly spoilt for choice. But there are a few, which you can compare below. Also, if you take advantage of your credit card’s perks, you could find that the value they offer outweighs the cost of the annual fee.

Luke's Spanish restaurant – well worth the annual fee

Luke manages a Spanish restaurant in Manchester. He has a business credit card that offers 1% cashback and costs £50 a year. He’s wondering if he should switch to a cheaper deal. So he does a bit of maths.

He habitually uses the card to buy fresh ingredients for his restaurant’s recipes. He spends around £1,500 on it every month, which makes £18,000 a year. That means he earns £180 worth of cashback every year, which is £130 more than the annual fee. In his case, the annual fee is well worth it, so he decides to keep his current card.

Compare no annual fee business credit cards

Updated November 21st, 2019
Name Product Purchases Annual/monthly fees Credit limits Rep. APR Incentive Representative example
39.9
£0
Min. limit £1,000, max. limit £50,000.
39.9% p.a. (variable)
Opt-in to Capital Club for £99 pa to earn 1 point for every £1 spent. 2 points can be redeemed for either 1 Avios Point or 1p in cashback. 10,000 bonus points when £5,000 spent in first 3 months. Up to 15 free supplementary cards available.
Representative example: When you spend £1,200 at a purchase rate of 39.9% (variable) p.a., your representative rate is 39.9% APR (variable).
14.9%
£0
Min. limit £500, max. limit not specified.
14.9% p.a. (variable)
Representative example: When you spend £1,200 at a purchase rate of 14.9% (variable) p.a., your representative rate is 14.9% APR (variable).
0% for 3 months reverting to 24.9%
£0
Min. limit £1,000, max. limit £25,000.
24.9% p.a. (variable)
Business Rewards - giving a range of discounts and rebates (up to 66% off AA membership, save 20% on B2B marketing sites and access to 99 UK business credit reports for £75, 5% Avis rebate, 15% off Ryman's stationary, up to 15% off with APH, £60 driving credit and first year membership free with Zipcar, first year of FSB registration free, 20% off bPay by Barclaycard device, up to 15% off ecommerce website with cloudBuy, 5% rebate on online advertising spend with Bing, 10% off selected hotel reservations for business trips with booking.com, 4% rebate at over 5,000 hotels and 10,000 restaurants and 1% rebate at petrol stations at selected locations with the USA and Canada with Mastercard, 3% off business flights with flybmi and 25% off first £200 spend at Amazon Business).
Representative example: When you spend £1,200 at a purchase rate of 24.9% (variable) p.a., your representative rate is 24.9% APR (variable).
0% for 3 months reverting to 24.9%
£0
Min. limit £1,000, max. limit £25,000.
24.9% p.a. (variable)
0% for 60 days on purchases made at Toolstation and participating group companies.
Representative example: When you spend £1,200 at a purchase rate of 24.9% (variable) p.a., your representative rate is 24.9% APR (variable).
0% for 3 months reverting to 24.9%
£0
Min. limit £1,000, max. limit £25,000.
24.9% p.a. (variable)
0% for 60 days on purchases made at Travis Perkins and participating group companies.
Representative example: When you spend £1,200 at a purchase rate of 24.9% (variable) p.a., your representative rate is 24.9% APR (variable).
29.94%
£0
Min. limit £100, max. limit £3,000.
29.9% p.a. (variable)
Representative example: When you spend £1,200 at a purchase rate of 29.94% (variable) p.a., your representative rate is 29.9% APR (variable).

Compare up to 4 providers

Approval for any credit card will depend on your status. The APR shown represents the interest rate offered to most successful applicants. Depending on your personal circumstances the APR you're offered may be higher, or you may not be offered credit at all. Fees and rates are subject to change without notice. It's always wise to check the terms of any deal before you borrow.

Additional card(s) fees

This tells you how much giving extra cards to other members of your team will cost you. If someone else in your company constantly needs to go out and about, for example to take clients to dinner, you may want to give them a dedicated card.

Business credit cards often come with extra tools that allow you, for example, to set a personalised limit for each additional card. It’s a very practical way of streamlining your business’s expenses while also keeping it all under control.

How to avoid it: Various business credit cards allow you to get up to a certain number of additional cards for free. Think about how many colleagues you want to give cards to and then pick your business credit card taking that into account.

Foreign transaction fees

There is normally a foreign currency transaction fee if you use your business credit card outside the UK – or even (be careful!) if you buy something online but in a currency other than sterling.

Most business owners don’t do business abroad, so this is not a concern. But if you do you want to be careful, because foreign transaction fees are normally around 3% of every transaction – not exactly cheap. If you spend £1,000 on your card abroad and have a currency transaction fee of 3%, it’ll cost you £30 in fees. Not pretty.

How to avoid it: Look for a business credit card that doesn’t apply a foreign transaction fee. There aren’t many but you can compare your options below. Alternatively, there are a few business accounts offered by challenger banks like Starling that allow fee-free spending abroad. They don’t usually do business credit cards, but when you’re out of the country you could use your debit card instead.

Laura's web design company – saving on foreign transaction fees

Laura’s web design company just got its first client outside the UK – a German firm. She travels to Berlin to meet the firm and spends £600 on her business credit card. When she comes back and checks her statement, she realises she’s been charged a hefty £18 foreign transaction fee. She plans to get more clients in the eurozone and knows she’ll have to travel there often, so she decides to shop around and get a new business credit card that applies no foreign transaction fees.

Compare business credit cards with no non-sterling transaction fees

Table: sorted by representative APR, promoted deals first
Updated November 21st, 2019
Name Product Foreign usage charge (EU) Foreign usage charge (rest of world) Annual/monthly fees Rep. APR Incentive Representative example
0%
0%
£0
39.9% p.a. (variable)
Opt-in to Capital Club for £99 pa to earn 1 point for every £1 spent. 2 points can be redeemed for either 1 Avios Point or 1p in cashback. 10,000 bonus points when £5,000 spent in first 3 months. Up to 15 free supplementary cards available.
Representative example: When you spend £1,200 at a purchase rate of 39.9% (variable) p.a., your representative rate is 39.9% APR (variable).
0%
0%
£30 per annum (fee paid is per business, not per card)
23.7% p.a. (variable)
1% after £1 of monthly spend. Cashback paid Monthly into Card Account.
Representative example: When you spend £1,200 at a purchase rate of 18.9% (variable) p.a. with a fee of . All - Fee paid is per business, not per card: £30 per annum, your representative rate is 23.7% APR (variable).
0%
0%
£70 per annum
29% p.a. (variable)
0.5% after £1 of yearly spend. Maximum of £400 cashback paid per month. Cashback paid Monthly into Card Account. 2% cashback on eligible trade and business supplies, 1% cashback on eligible fuel and hotel accommodation and 0.5% cashback on all other business spending. Max £400 per annum.
Representative example: When you spend £1,200 at a purchase rate of 14.816% (variable) p.a. with a fee of £70 per annum, your representative rate is 29% APR (variable).
0%
0%
£70 per annum
29% p.a. (variable)
0.5% after £1 of yearly spend. Maximum of £400 cashback paid per month. Cashback paid Monthly into Card Account. 2% cashback on eligible trade and business supplies, 1% cashback on eligible fuel and hotel accommodation and 0.5% cashback on all other business spending. Max £400 per annum.
Representative example: When you spend £1,200 at a purchase rate of 14.816% (variable) p.a. with a fee of £70 per annum, your representative rate is 29% APR (variable).

Compare up to 4 providers

Balance transfer fees

As we said, the distinctive lack of 0% deals on balance transfers in the business credit card space does not mean that you can’t do a balance transfer at all. In fact, many business credit cards allow it.

However, if you do, you’ll be charged both the interest rate and the balance transfer fee, which is usually a percentage of the balance you’re looking to transfer and can be up to 3% of the amount. Since it’s a percentage, the bigger the transfer, the higher the fee.

How to avoid it: You can compare business credit cards for balance transfers on our dedicated page. You’ll see that a few of them don’t charge any balance transfer fees. If you’re considering a balance transfer, always calculate its overall cost before proceeding: Will you pay less in interest? By how much? How much are the balance transfer fee and the annual fee of the new card? Otherwise you could end up with a worse deal.

Jenny's production company – moving your balance to save on debt

Jenny owns a small production company. She gets commissioned a new video from a big corporate that could really scale up her business, but needs better quality equipment to pull it off to the right standards. She owns a business credit card that offers nice rewards but charges a 31% rate on purchases. It’s never been a problem because she’s always cleared her balance in full. She now uses it to buy a new professional camera and a new microphone (£6,000 in total). She thinks she’ll need around 6 months to pay the sum back, then realises this would cost her £527 in interest at her current card’s rate.

She decides to switch to a credit card with a lower rate (15% on balance transfers) and a 2% balance transfer fee (£120). If she pays her debt back within 6 months, she’ll now be charged £259 in interest. Even after factoring in the balance transfer fee, she’ll have saved £148.

Cash advance fees

As we said, taking out cash with your credit card isn’t the brightest of ideas. Aside from interest (which is charged starting from the day of the transaction), you’ll usually also be charged a cash advance fee that can easily amount to 3% of the transaction.

If you’re abroad, cash advance fees, foreign currency fees and potentially independent ATM fees will add up to create a huge monster fee ready to eat up your credit card budget and most likely give you a heart attack next time you check your statement. Be nice to yourself… don’t do that.

How to avoid it: If you need to pay cash for any reason, don’t take it out with your business credit card. Use your business debit card instead. Plus, if you do use your credit card at an ATM because of an emergency, don’t wait for your next credit card statement. Pay back the sum as soon as possible instead.

What is defined as a cash advance?

Serena has learned her lesson on cash advance fees

Serena is a freelance photographer and is planning to redecorate her studio. One day at the local market she sees a painting she really likes and decides to buy it. Since the stall only accepts cash, she withdraws £250 from an ATM using her business credit card. When she gets the next bill, she realises she has been charged a 3% cash advance fee (£7.50), plus the 29.9% cash advance rate for 25 days (£5.12). All in all, that ATM withdrawal cost her a shocking £12.62. Serena has learned her lesson and now knows she needs to use her business debit card (not credit card!) to withdraw cash.

Late payment fees

Ideally, you should always clear your credit card balance in full every month, but if you can’t, what you really need to do is meet the minimum monthly payment. That’s usually a percentage of your outstanding debt and can vary quite a lot depending on the card, but it will normally be somewhere between 1% and 10% for business credit cards.

If you don’t meet it, you could be charged a late payment fee, which can be up to £12. Not all business credit cards apply it, but it is fairly common.

Late payments could also impact your credit score. Keep in mind that in some cases (for example if you signed a personal guarantee) your business credit card could affect your personal credit score as well as your business’s.

How to avoid it: Always meet the minimum payment and make sure you pay on time. Ideally, you should set up a direct debit, so that your business credit card bill will always get paid, even if you forget about it. With most credit cards, you can choose to set the direct debit to meet the minimum payment, clear your balance in full or pay a fixed amount or a percentage of your debt.

If you want control over what you’ll pay and when, but also want to make sure you avoid any late payment fees, you can set up a direct debit for the minimum payment and then manually pay back the rest. Don’t forget that if you only cover the minimum payment every month, you’ll quickly accumulate a chunky balance that will accrue expensive interest.

Other business credit card fees

These business credit card fees are less common, but it’s still good to know when they may apply and how you can avoid them.

  • Exceeding limit fee. Quite a few business credit cards charge a fee if you go beyond your credit limit. It can be up to £12.
  • Returned payment fee. If your credit card bill payment method is returned, for example a failed direct debit, cheque or other payment due to lack of funds, you’re usually charged £12.
  • Independent cash machine fee. Technically, this has nothing to do with your credit card, but you still need to be aware of it. Sometimes (especially outside the UK) independent ATMs charge their own fee on top of your credit card fees for cash advances.
  • Paper statement fee. This is how much you’ll be charged if you request a printed copy of your statements. So, go paperless! It’ll turn out cheaper for you and the environment will also be happier.
  • Dormancy fee. Although this type of fee is relatively rare, a few providers charge an inactivity fee if you go for a long period without using your credit card. If you’re not using the card and your provider does charge a dormancy fee, consider closing it altogether.

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

Was this content helpful to you? No  Yes
Go to site