What are interest-free business credit cards?
Your guide to everything you need to know about interest-free business credit cards.
The majority of business credit cards charge interest if you don’t pay off your outstanding balance in full each month. But a handful of providers offer short introductory periods during which you can make purchases without paying interest, provided you clear the balance before the offer ends. Here’s what you need to know.
Key takeaways
Interest-free business credit cards don’t charge interest on purchases and/or balance transfers for a set time
Business credit cards typically offer shorter 0% introductory offers than personal credit cards
If you don’t pay off your balance before the end of the 0% deal, the standard rate of interest kicks in
Business credit cards can help you manage cash flow and track spending, with some offering additional perks, such as cashback
Earn rewards and save money with a business credit card
What is a 0% business credit card?
A 0% business credit card doesn’t charge interest on purchases for a fixed introductory period. Some cards also offer interest-free balance transfers.
Although most business credit cards offer a grace period of around 45 to 56 days on new purchases as standard (provided you clear your statement balance in full each month), 0% business credit cards take this a step further by offering lengthier interest-free deals.
However, while the interest-free window on personal credit cards can last for up to three years, business versions are far more limited, often lasting no more than six months.
If you use a 0% business credit card, it’s important to clear the balance before the end of the introductory period, because the card will revert to its standard interest rate at this point.
How do interest-free business credit cards work?
If you apply for an interest-free purchases business credit card, you don’t pay any interest on spending during the introductory period. However, you must still meet your minimum monthly repayments to avoid a late payment fee. Missed payments can also result in the withdrawal of your 0% offer and could hurt your business credit score.
Another important point is that the 0% period applies to all purchases collectively and doesn’t reset with each spend. For example, if your 0% purchase period lasts six months, a £1,000 purchase made in month one has the full six months to be repaid interest-free. But if you make the same purchase in month five, you only get the remaining month before the standard APR, which is typically much higher, starts to apply.
If your card offers 0% on balance transfers, you can transfer over existing debt from another credit card and avoid paying interest on that debt for several months. However, you need to watch out for the balance transfer fee, which is typically 3% of the amount transferred.
Benefits and drawbacks of 0% business credit cards
There are many benefits to using a 0% business credit card, such as:
Improved cash flow management – A 0% business credit card can enable you to spread the cost of purchases without waiting for funds to become available
Being able to buy larger items – You can buy big-ticket items, such as equipment and tools, and pay them off interest-free over the promotional period
Business expenses tracking – Many business credit cards come with tools that enable you to easily track and categorise your spending, including employee expenses. Some cards even synchronise with accounting software
Rewards and cashback – Some business credit cards offer additional perks, such as cashback or air miles
Often quicker than applying for a loan – Provided you meet the qualifying criteria, applying for a business credit card is typically faster than applying for a business loan
As well as the advantages, it’s important to be aware of the potential downsides of 0% business credit cards:
Short 0% offers – Interest-free deals for business credit cards tend to be much shorter compared to personal credit cards
High APR following the end of the offer – The standard rate of interest that kicks in once the 0% deal ends is usually high
Fees – Some business credit cards come with high annual fees, so be sure to check
Qualifying difficulties – To get an interest-free business credit card, your business typically needs a good credit score and a solid trading history
How to choose the best 0% business credit card
When comparing 0% business credit cards, there are several factors to consider, including:
Length of the interest-free period – Make sure the 0% deal lasts long enough for your repayment plan; if it’s too short, it may not be suitable
What the 0% deal applies to – Some interest-free offers apply to purchases, while others apply to balance transfers
Standard APR after the 0% offer ends – This is the rate you pay once your interest-free deal has finished, so it’s important to understand how high this will be
Fees – Find out whether the card has an annual fee and, if you plan to use your credit card overseas, whether there’s a foreign transaction fee
Other benefits – Does the card offer any rewards, such as cashback or travel perks?
Eligibility criteria – You may need to meet a specific turnover requirement or have been trading for a set time. Avoid applying for a card you won’t get because this can affect your credit record if you’re forced to make subsequent credit card applications
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Conclusion
An interest-free business credit card can be a useful short-term tool for managing cash flow and reducing financing costs. Make sure to choose a business credit card that fits your business, and have a plan to repay your balance before the 0% period ends to avoid high interest charges.
About Rachel Wait
Rachel has spent the majority of her career writing about personal finance for leading price comparison sites and the national press, including for the Mail on Sunday, The Observer, The Spectator, the Evening Standard, Forbes UK and The Sun.