Compare Interest Free Business Credit Cards

Benefits for UK SMEs

No interest to pay if the balance is paid off in time

Interest-free periods typically last between 42 and 56 days. This is the breathing room between the purchase and repayment for SMEs, and such a period of grace is helpful for cash flow. Interest rates are often high, so you want to make sure the full statement balance is paid off by the due date to avoid interest. The interest-free period, when used perpetually throughout the year, can save thousands of pounds in interest.

Cash flow management

Cash flow is typically the number one threat to survival and profitability for SMEs, and credit cards are a powerful tool for managing this. Businesses can time their purchases so that they can buy stock or equipment when it’s needed rather than waiting for funds to become available. This helps stay one step ahead, fulfil orders, and keep operations ticking so that revenue doesn’t dry up. The 6 to 8 week interest-free period is enough to see out quiet months and seasonal variations.

Business expense tracking

Beyond the interest-free grace period, the business credit card can be used for all purchases, including employee spending. Only using the credit card account keeps the finances and accounting centralised, with many providers automatically categorising each purchase. Some cards sync with third-party accounting software, with real-time spending alerts and controls to prevent overspending.

Rewards and intro bonuses

Interest-free business credit card providers often entice customers with rewards and introductory bonuses. The first six months of purchases might be free of interest, for example, or the first year may waive the annual fee. The most common reward is cashback, typically ranging from 1-2%. With £100,000 annual spending, this could result in £1,000 in cashback, which may then be transferable to Avios points or similar.

Other rewards include travel insurance or access to discounted, partnered services.

How interest-free business credit cards work

When a purchase is made on an interest-free business credit card, no interest is incurred if the balance is paid in full by the statement due date. This period is calculated from the statement date rather than the purchase date, which creates a window of borrowing at zero cost. In other words, a mid-month purchase would be applied to this month’s statement, but the statement date determines when your payment due date begins. So, you benefit from interest-free periods regardless of billing cycle dates.

If you pay the minimum amount required rather than the full amount, you will incur interest, but it won’t negatively impact your credit score. As stated above, we’d recommend that you clear the statement balance in full to avoid interest.

When will I be charged interest?

It’s important to know when you will be charged interest so that you can maximise this interest-free period. Plus, with interest rates often over 20%, they can incur seriously high costs if neglected.

It’s essential to understand if your credit card has an introductory period beyond the standard 42 to 56 days’ interest-free period. For example, it might be 6 months, and you’re protected from interest during this entire period. Keep an eye on when the account was opened so that you don’t overrun, but there will be a date outlined in the card agreement. To avoid charges, pay off the balance in full so it’s cleared before this date.

Cash advances through business credit cards usually incur immediate interest – there is no grace period. They’re one of the most expensive forms of borrowing in the UK, with fees ranging from 2-4% (often referred to as “ATM withdrawal fees”, plus potentially heightened interest rates. Interest begins on the day you withdraw the cash.

Missing the minimum payment is a costly mistake. It firstly triggers interest charges on your entire outstanding balance, so failing to meet the minimum payment means losing the interest-free benefit on all purchases in that statement. A late payment fee is then likely, often around £12, and your credit score will almost certainly suffer. The interest you pay will be calculated from the transaction date, not the statement date.

To help avoid late payments, it’s recommended to set up a direct debit that at least covers the minimum payment (ensure this account always has sufficient funds), but you may want to consider a direct debit to clear the full balance.

Factors to consider when choosing an interest-free business credit card

Duration of interest-free period

The length of the interest-free period can vary, and it’s not insignificant. The difference between 42 days and 56 days is 14 days. Over two weeks, a £50,000 balance at 25% APR will incur £479.45 in interest, equivalent to almost 1% of the original amount, which is similar to the effect of undoing the cashback reward. So, if the SME has access to significant credit limits, the interest saved could be thousands each year. For cards offering 6+ months interest-free introductory periods, the savings can be huge (at the time of writing, no cards were offering long interest-free introductory periods).

Additional benefits and rewards

Interest-free business credit cards typically offer rewards like cashback, which could be enhanced for EV and fuel purchases, as well as points-based redemption for travel. Cashback becomes particularly beneficial for SMEs with large outgoings, and when these outgoings can be paid for with a credit card.

And, while a taxi service may benefit from fuel-boosted cashback, a tech firm may prefer a card that has access to discounted SaaS services.

Other features, like expense tracking, become very important. Companies with many employees will value credit cards with free, unlimited employee cards, while those set on using Sage or QuickBooks will look for a card provider that integrates with their existing system.

Annual fees

The trope “you get what you pay for” is no different when it comes to credit card providers. While many are free, the cards offering 2% cashback or particularly comprehensive travel insurance are often the cards charging an annual fee, which can be several hundred pounds per year. Free cards aren’t always better, as large spenders can often yield more than what they pay.

APR

Annual Percentage Rate (APR) is essentially the annualised interest rate – it’s a standard that helps us compare credit cards. APRs for business credit cards are usually expensive, such as 20-50%.

APR only applies when the promotional periods expire, minimum payments are missed or when balances remain unpaid beyond their interest-free period.

Eligibility requirements

Interest-free business credit cards in the UK will require the business to be UK-registered. Sometimes, they will require a trading history of 6 to 12 months and minimum turnover thresholds. Directors will undergo personal credit checks as they’re going to be liable for business card debt. However, there are options for new businesses with lower revenues.

Repayment strategy

Your decision over what card to get may come down to your anticipated repayment strategy. If the business doesn’t struggle with unpredictable cash flow and can meet repayments comfortably, then opting for a card with a higher APR may not be a problem. For those that do struggle to meet liabilities, long interest-free periods, low minimum payments and low APR could be a priority. Repayments may be more easily managed thanks to the account features or software integration of the card itself, too, which is worth consideration.

FAQs