Home › Guides › Business credit card vs business loan vs overdraft
Business credit card vs business loan vs overdraft
All three let a business spend money it has not yet earned. They suit different jobs, and using the wrong one is a quiet way to overpay.
Work out your repayments
Put in an amount, a rate and a term and see the monthly repayment, the total repayable and the interest, month by month. Illustrative, free, and nothing is collected.
The short version
- A business credit card is a revolving limit for day-to-day purchases. Pay in full and the borrowing can be free for weeks. Carry a balance and it is usually the most expensive of the three.
- A business loan is a fixed sum repaid over a fixed term. It suits a one-off need and normally costs less per year than a card balance, but you pay interest from day one on money you may not need yet.
- An overdraft is a limit on your business current account. You pay only on what you use, but the limit is usually reviewable and can be withdrawn.
How the costs compare, on published figures
The cards we compare publish representative APRs from 15.95% (Lloyds Bank) to 104.9% (the British Airways American Express card). Strip out the fee-driven extremes and most bank cards sit between 15.95% and 27.7%. The high-street banks in our business loans comparison publish representative APRs between 8.5% and 14.9% depending on how much you borrow, for example Barclays 14.9% up to £5,000 and 8.5% from £15,001 to £25,000. So on published figures, a bank loan is cheaper per year than a card balance. Two caveats keep that honest. First, a loan is charged on the whole sum for the whole term, while a card charges only on what you carry, and for nothing at all if you clear the balance within the interest-free period. Second, representative APRs are averages and your own rate is set by the lender. The calculator and the business loan calculator let you put numbers on both.
A worked comparison
To see the gap in pounds, take £10,000 repaid in equal instalments over 12 months, and treat each published yearly rate as the interest rate, which is the basis our calculators use by default. At 11.2%, the representative APR Lloyds Bank publishes for its small business loan, the payment is £884.75 a month and the interest over the year is £617.00. At 22.91%, the simple annual purchase rate Barclaycard publishes for its Select Cashback card, the payment is £940.33 and the interest is £1283.95. The card costs about £667 more over the year on those assumptions. If the card balance were cleared inside the interest-free period, its interest would be nil, which is why the right comparison depends on how long you will really borrow. This is illustration only: neither lender has offered these figures to you.
Matching the product to the job
Regular, repayable purchases: the card
Software subscriptions, fuel, supplies and travel are the natural territory of a card, because you can pay the statement in full each month and the interest-free period works in your favour. The card also gives a clear record of spend, and many issuers let you add employee cards with their own limits. If the balance will not be cleared within weeks, a card is the wrong tool, and the interest-free days stop helping.
A one-off, larger need: the loan
Buying equipment, funding a refit or hiring ahead of growth is a job for a term loan, or for asset finance if the thing you are buying can be the security. A fixed repayment and a published rate make the cost knowable on day one. Our guide to small business loans explains what lenders look at.
Fluctuating cash flow: the overdraft
If your account swings between positive and negative around payment dates, an overdraft covers the troughs and costs nothing when you are in credit. The trade-off is that it is a limit the bank can review, so it is a poor foundation for long-term funding. Overdraft pricing varies by bank and is often set per business, so we do not publish overdraft rates here.
Liability and security
Cards and unsecured loans share a feature: for a limited company, the issuer may ask a director for a personal guarantee. What the issuers actually publish is in our guide to business credit cards and personal guarantees. Secured loans and asset finance put a specific asset behind the debt instead. None of the three is risk-free; they put the risk in different places, so ask each lender what security or guarantee it requires.
Do not mix them up
The expensive mistakes are structural. Funding a long-term asset on a card and carrying the balance for years pays the highest rate for the longest time. Taking a loan to cover a gap you will fill in six weeks pays interest on a lump sum you did not need. Using an overdraft as permanent capital leaves the business exposed if the limit is cut. If you are unsure, ask what the money is for and how long it will be needed. Our guide to comparing business loans sets out the method, and the business credit card comparison gives the figures for the card side.
A note on tax
We do not give tax advice, and nothing here is a statement about what you can claim. HMRC’s own guidance on business expenses for the self-employed is the place to start, and an accountant can tell you how it applies to your business.
Sources
Every issuer figure in this guide was read from the issuer’s own page on the date shown. Terms change, so check the live page before you apply.
- American Express British Airways American Express Accelerating Business Card: americanexpress.com, read 13 October 2026
- Lloyds Bank Business Credit Card: lloydsbank.com, read 13 October 2026
Want a specialist to search the market for you?
Tell us about your company and what you need. With your consent, a specialist business finance broker contacts you and does the searching. Free to use; we may be paid by the broker for the introduction.
Frequently asked questions
Is a business credit card cheaper than a business loan?
On published representative APRs, bank loans in our comparison (8.5% to 14.9%) are cheaper per year than card balances (15.95% and upwards). A card can still cost far less overall if you clear it within the interest-free period.
Can I use a business credit card instead of a loan?
For regular purchases you will repay quickly, yes. For a large, long-term cost, a loan or asset finance is usually cheaper per year and gives a fixed repayment schedule.
What is the difference between a business overdraft and a credit card?
An overdraft is a limit on your current account that you pay for only when you use it; a card is a separate revolving account with a statement, an interest-free period and its own rates and fees.
Which is best for a start-up?
That depends on what the money is for and what each lender will offer. Our start-up loans guide covers government-backed borrowing, and the card eligibility guide covers what card issuers say.