What businesses wish they knew before applying for their first credit card

Taking your first step into business credit often comes with a few surprises. Businesses regularly mention lessons they’ve learned from their first credit card experience – from hidden fees to unexpected benefits – that could save you both time and money. Here’s what many wish they’d known from the start.

The right card can transform your cash flow

Many businesses discover too late how a business credit card differs from personal credit. It’s not so much about separating expenses as it is having a helpful cash flow tool that gives you breathing room between paying suppliers and waiting for customer payments.

With up to a certain number of days of interest-free credit on purchases (depending on the lender and your card, as well as when in the billing cycle you make a purchase), you can effectively bridge those awkward timing gaps. The added flexibility can be the difference between comfortable operations and nail-biting cash crunches, especially for seasonal businesses or those with irregular payment cycles.

Credit limits might not match your needs at first

“I applied expecting to get enough credit to cover all my monthly expenses,” is a common reaction from new business cardholders. The reality can be quite different.

Your initial credit limit might be lower than anticipated, particularly if your business is young or your credit history is limited. Credit card providers need to build trust in your ability to manage the facility responsibly before increasing limits.

Start small and build up

Start with realistic expectations and a clear purpose for the card. Demonstrate good management by keeping balances well below your limit and making consistent, on-time payments. Providers may review your credit limit after 6 to 12 months of responsible use, and some increase it automatically if you’re managing the account well.

The true cost goes beyond the APR

When comparing cards, the representative APR (Annual Percentage Rate) is often the headline figure. A closer look at the full cost structure, however, will reveal important details that many businesses can miss initially.

Hidden costs to watch for

Annual or monthly fees can add significant cost to a card, especially for businesses with lower spending volumes. Foreign transaction charges often catch out businesses that purchase internationally, sometimes adding 3% to 4% to overseas transactions.

Cash advance fees and interest rates are typically much higher than standard purchase rates, while late payment penalties and over-limit fees can quickly add up if you’re not careful with your account management. One option to avoid this is to go for a card with no interest rates, like FlexiPay from Funding Circle. Instead, it’s one simple flat fee per transaction. 

While a card might have “no annual fee,” it’s good practice to look at the full range of possible charges. Understanding these will help you choose the card that best fits your financial needs.

Rewards programs aren’t all created equal

“I spent a year accumulating points I couldn’t actually use for anything relevant to my business,” is a frustration shared by many small business owners.

The value of rewards programs varies depending on your business spending patterns. Points-based systems can be fantastic if you travel frequently, but might offer limited value for businesses with different expense profiles.

Finding the right rewards match

Consider whether you’d be better served by cashback programmes that convert spending directly into money back, points systems tied to travel benefits or programs that align with your largest expense categories. The best rewards are the ones you’ll actually use, so be realistic about your business activities when comparing options.

You’ll need to think about payment strategies

A common regret is often not having a clear repayment strategy from day one. While the flexibility of minimum payments can be helpful in tight months, consistently carrying balances can lead to significant interest costs over time with some lenders.

Aim to develop a clear policy on which expenses go on the card versus which are paid through other means. Decide whether to pay in full each month or strategically carry balances. Set guidelines about who has authority to use the card and for what purposes. Setting alerts for payment due dates and approaching limits can help avoid nasty surprises.

Protection benefits can be valuable but often overlooked

The additional protections many business credit cards offer frequently go unnoticed until they’re needed. While Section 75 protection (which applies to consumer credit cards) isn’t available for business cards, many business credit cards offer their own purchase protection policies. 

These can include protection against supplier failure, damage or theft of purchased items, extended warranties on business equipment and zero liability policies for fraud protection. These features often represent significant value and reduce risk for your business.

Protections aren’t just ‘nice-to-haves’ either. In some cases, they can save you from losses that might otherwise be catastrophic for a small business.

The Funding Circle Cashback business credit card

If you’re looking for straightforward value from a business credit card, the Funding Circle Cashback business credit card offers an alternative to complex points systems. It’s designed specifically for small and medium-sized businesses looking for simplicity and value, without the need to open a business bank account.

Features include:

• 2% cashback for the first 6 months (up to £2,000)
• 1% uncapped cashback thereafter on all purchases
• Up to 42 days interest-free credit
• No monthly fee or hidden costs
• Credit limit up to £250,000 for eligible businesses
• Rates from 14.9% per year (Representative 34.9% APR variable)

You can use the card for everything from office supplies and team expenses to larger purchases like stock or equipment. The cashback is automatically credited to your account when you make a payment towards your statement, turning your everyday business spending into money back with no complicated redemption processes.

Beyond the plastic

A business credit card should be a financial solution that works for your business, not against it. The right card, used with purpose and discipline, creates breathing room, builds credit history and can even put money back in your pocket. Choose wisely, use strategically and watch it become an asset, not just a piece of plastic.

While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial or legal advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.