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

A Man In A White Shirt Holds A Black Capital On Tap Business Credit Card To The Camera

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

Credit card rates usually are the interest charged on balances, fees are charges for card usage, and charges are costs for specific transactions or breaking the credit agreement. 

Key takeaways

  • Rates: Think of rates as the cost of borrowing. They depend on factors like your business’ credit score and financial health, and the Bank of England’s Bank Rate.
  • Fees: Fees are additional charges. They can include an annual fee, late payment fees, and employee card fees. 
  • Charges: Charges are the actual costs you incur when you use the card. This includes fees for foreign transactions, ATM charges, and balance transfer charges.
  • Being aware of rates, charges and fees can help businesses make smart choices with their credit cards.

Business credit card rates 

Business credit card rates are the costs associated with using a credit card to borrow money for business expenses.

How are business credit card rates calculated?

Business credit card rates are typically calculated based on a few key factors. The main components include:

  • Annual Percentage Rate (APR): APR is a measure of how much borrowing a sum of money will cost you over a year, given as a percentage of the money borrowed. Representative or typical APR is the rate that is offered to at least 51% of customers who apply successfully for the credit card or loan. This means it’s the rate that most people will receive, but it’s not guaranteed for everyone. The final cost of borrowing will depend on factors such as the actual interest rate you are offered, how you utilise the credit card or loan, and the amount you repay on a monthly basis. This means the APR may not directly reflect the exact cost of a credit card or loan to you, but can be used as a way to compare different products.

  • Bank Rate: Many business credit cards have variable interest rates tied to the Bank Rate. It’s the rate the Bank of England charges other banks and other lenders when they borrow money. As the Bank Rate fluctuates, so does the variable interest rate on credit cards.

  • Creditworthiness of the business: Just like personal credit cards, a business's creditworthiness plays a crucial role. If a business has a good credit history and score, it is more likely to qualify for a lower interest rate.

  • Introductory offers: Some business credit cards may have introductory offers with low or zero interest rates for a specified period. After this period, the standard rates will apply.

Understanding these factors can help businesses make informed decisions when choosing a credit card that aligns with their financial needs and capabilities. Always carefully review the terms and conditions of a credit card to understand how the rates are calculated and any potential fees associated with its use.

What factors affect your business credit card rate?

The rate you get on your business credit card can be influenced by several factors. Here are some of the key factors that can affect your business credit card rate:

  • Credit score: Just like with personal credit cards, your business credit card rate is often tied to your business credit score. A higher credit score generally means a lower interest rate.

  • Business financials: Lenders often consider the financial health of your business. A stable and profitable business is more likely to receive a favourable credit card rate.

  • Card type and features: The type of business credit card you choose can impact the rate. Cards with more features or rewards programmes may have higher rates.

  • Economic conditions: The overall economic climate can influence interest rates. When the economy isn’t doing well, rates may be higher. During periods of economic growth, they could be lower. 

  • Market competition: The competitiveness among credit card providers can affect rates. If there's stiff competition, some providers may offer lower rates to attract business customers.

  • Payment terms: The terms you agree to, such as minimum payment requirements, can also affect your overall cost.

Business credit card fees 

Business credit cards often come with various fees that can impact the overall cost of using the card. While the specific fees can vary depending on the card provider and the terms of the agreement, here are some common business credit card fees:

What are the most common business credit card fees?

  • Annual fee: Many business credit cards charge an annual fee for the card. This fee can range from a few dozen to a few hundred pounds and is typically charged once a year.

  • Late payment fee: If you don't make at least the minimum payment by the due date, you may be subject to a late payment fee. This fee can vary between credit card providers.

  • Returned payment fee: If a payment is returned due to insufficient funds or other reasons, you may be charged a returned payment fee.

  • Employee card fee: Some business credit cards charge fees for additional employee cards. These fees can be per card or a flat annual fee for all employee cards.

  • Rewards programme fee: Some business credit cards may have fees associated with their rewards programme. This could include annual fees for premium, upgraded rewards programmes or redemption fees.

It's essential to carefully review the terms and conditions of any business credit card to understand the fees associated with its use. Keep in mind that some cards may waive certain fees for the first year or offer other introductory benefits. Check out our blog on choosing a business credit card to learn more. 

Keep a close watch on how much inventory you have on hand. This helps you avoid having too much or too little. It ensures that your business credit card spending matches your actual inventory needs.

How can you avoid or minimise business credit card fees?

Managing your business credit card fees is crucial for keeping your company's finances in check. Here are some straightforward tips to help you avoid or minimise business credit card fees:

  • Choose wisely: Select a business credit card with lower or no annual fees. Compare different cards and their fee structures to find one that aligns with your company's needs and spending habits.

  • Pay on time: Timely payments not only help you maintain a positive credit history but also avoid late payment fees. Set up reminders or automatic payments to ensure you never miss a due date.

  • Understand your card's terms: Read the terms and conditions of your business credit card thoroughly. Understand the fee schedule, including cash advance fees, foreign transaction fees, and any other potential charges.

  • Optimise rewards programmes: If your business credit card has a rewards programme, make sure you understand how to maximise its benefits. This can help offset annual fees or even provide additional value for your spending.

  • Employee education: If your business issues credit cards to employees, ensure they are aware of the company's spending policies. Educate them on responsible card use to minimise the risk of fees incurred due to misuse.

  • Consider fee-free alternatives: Explore business credit card options that have no annual or transaction fees.

Business credit card charges

Business credit card charges refer to the payments associated with using a business credit card.

What are the different types of business credit card charges?

  • Interest charges: If you carry a balance from month to month, meaning you haven’t repaid your balance in full, you will likely incur interest charges on the outstanding balance. 

  • Foreign transaction charges: If you make purchases in a foreign currency or make transactions outside your home country, you might incur a foreign transaction fee, typically a percentage of the transaction amount. 

  • ATM charges: When you use your credit card to withdraw cash from an ATM, you may be charged a cash advance fee. This fee is usually a percentage of the amount withdrawn.

  • Balance transfer charges: If you transfer a balance from another credit card to your business credit card, you may be charged a balance transfer fee. This fee is usually a percentage of the amount transferred.

Capital on Tap doesn’t charge for foreign transactions or ATM usage!

The bottom line

In simple terms, understanding business credit cards means knowing about rates, fees, and charges. Rates are influenced by things like your credit score and the type of card you choose. Fees, such as annual or late payment fees, need careful handling, and strategies like choosing the right card, paying on time, and understanding terms can help minimise their impact on your bottom line. Charges, like interest and ATM fees, are the costs you incur depending how you use your card. Making informed decisions and reading the card's terms ensure a smooth financial experience for businesses.

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

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