A credit card can offer a business a convenient way to purchase items and a sensible way to manage cash flow so long as you make the distinction between a business and personal credit card. If you don't a credit card is possibly one of the most dangerous forms of credit as it can get out of control very quickly. The only sensible way to use a credit card - either for business or personal use is to pay off the entire balance each month. With business credit cards this is exactly what happens and the balance is automatically cleared each month by Direct Debit.

This is not the case with personal credit cards. Each month you will receive an itemised statement which will include the minimum amount you must pay and a payment date. Some young businesses use personal credit cards to support their short term funding needs. Known as "bootstrap" finance this practice can become very expensive and is therefore never recommended.

When it comes to credit cards, especially personal credit cards there are literally thousands to choose from. They are offered by department stores, high street banks or even your favourite charity and the myriad of offers and incentives can be extremely confusing. Some offer a way to gather points which can be redeemed against air travel or other expenses and others may offer low introductory rates that escalate after a given period so getting the right advice, and reading the fine print is very important.

For both personal and business credit cards you will be allocated a pre-approved credit limit from your provider on acceptance of your application and you will be able to purchase items up to that limit in any given month. In the case of a business credit card you can obtain several cards for key staff if required. However the overall pre-approved limit would remain the same and not be applicable to each card. Used correctly a business credit card can be an extremely useful business tool especially for travel costs.

Ideal for:
Ad-hoc business purchases particularly when out of the office.

Security required:
For personal cards all you need to do is complete a form, detailing your income, assets and liabilities. Business cards are subject to lending approval alongside other debt and may well require personal guarantees.