You’re probably already well aware of the way credit cards work. Just like a consumer credit card, the business version lets you make a purchase and repay the card issuer later.

Interest is charged on a monthly basis, calculated by taking the Annual Percentage Rate (APR) and dividing it into twelve.

Your business will receive regular statements detailing purchases, how much you owe and how much interest is being charged. As long as you have a balance, you’ll be expected to make regular monthly repayments. A minimum amount will be required, although you can always pay off more than that if you’re in a position to do so. Doing that obviously means you’ll end up paying less interest.

Interest may also be added to the amount you have to repay if you do not pay the balance off in full by the date on the credit card statement. If you fail to make your payment, you’ll be charged a higher interest rate and possibly a late payment fee, which varies from bank to bank and will be outlined in your credit card terms and conditions.

Any outstanding balance on your card simply rolls over into the next month although you might need to pay the minimum amount shown on the statement.

Used responsibly, a credit card can be very useful, providing the flexibility to spread out the cost of a purchase. Always keep an eye on your balance to ensure your repayments remain affordable.