The Complete Guide to Business Credit Card Rates, Fees, and Charges

Business credit card costs are divided into interest rates, account fees, and usage charges. Your interest rate (APR) is determined by your creditworthiness and only applies if you carry a balance. You can avoid most other costs by choosing a no-annual-fee card, paying your balance in full each month to benefit from interest-free periods, and using cards that waive foreign transaction and ATM fees.

Understanding the difference between credit card rates, fees, and charges can be confusing. As a small business owner with a never-ending to-do list, you don't have time to spend hours researching. We’ve broken it down for you.

Definition checklist: rates, fees, and charges

While they all cost you money, they are triggered by different actions. Here is the clear difference:

• Rates (the cost of borrowing): This is the interest charged on any balance you don't pay off by the due date. It is shown as a percentage (APR).

• Fees (the cost of the agreement): These are set costs for holding the account or for specific "events," like an annual account fee or a late payment penalty.

• Charges (the cost of usage): These are costs for using the card in specific ways, such as withdrawing cash from an ATM or spending in a foreign currency.

Understanding APR, variable rates, and interest-free periods

When comparing business cards, you will see several technical terms. Here is what they actually mean for your business finances:

• APR (Annual Percentage Rate): The total cost of borrowing money over a year, including interest and standard fees (like annual fees). 

• Variable rate: An interest rate that can go up or down, usually in line with the Bank of England’s base rate.

• Interest-free period: The time (often up to 56 days) during which you aren't charged interest on purchases, provided you pay your full balance by the due date.

How representative APR is calculated

By law, lenders must show a "representative APR." This is the rate that at least 51% of successful applicants will receive.

To make this number comparable across different banks, the industry uses a standard "representative example":

1. Assumed credit limit: Usually £1,200.

2. Assumed spend: Borrowing the full £1,200 on day one.

3. Assumed repayment: Paying it back in equal monthly installments over one year.

Because it includes the annual fee, a card with a high annual fee will have a much higher Representative APR than a "no-fee" card, even if their interest rates are the same.

Note: The Representative APR always refers to the purchase interest rate. 

Factors that determine your credit card rate

Not everyone gets the same interest rate. Lenders look at several factors to decide how much to charge you:

• Creditworthiness: Your business credit score (and often your personal score) is the biggest factor. Better scores lead to lower rates.

• Business financials: Lenders may look at your revenue, profit margins, and how long you have been trading.

• The economy: As the Bank of England’s base rate rises or falls, most variable-rate credit cards move with it.

Common business credit card fees and charges

While rates are about borrowing, fees and charges are about how you use the card.

The bottom line

Rates are the cost of borrowing, influenced by your credit score and the wider economy. Fees are additional costs for the account itself or for mistakes, while charges depend on how you use your card day-to-day.

The Capital on Tap Business Credit Card has £0 annual fees, 0 FX fees, and free UK ATM withdrawals. With rates as low as 13.86% APR (variable) and limits up to £250,000, we provide a clear, flexible way to manage your business spend. Apply for your Capital on Tap Business Credit Card today. 

Interest rates are variable. Approval is subject to status and T&Cs.

Frequently asked questions

This post does not constitute financial advice. For funding advice, please contact your financial advisor or accountant.