This paper aims to study the interaction of local and overall flexural buckling in cold-formed steel (CFS) channels under axial compression. Detailed nonlinear FE models were developed and validated against a total of 36 axial compression tests on CFS plain and lipped channel columns with pin-ended boundary conditions. The numerical models incorporated the non-linear stress-strain behaviour of CFS material and enhanced properties of cold-worked corner regions obtained from coupon tests. The effects of initial geometric imperfections of the specimens measured by a specially designed set-up with laser displacement transducers were also taken into account. The developed FE models produced excellent predictions of the ultimate strength of the specimens obtained from experimental tests. The validated FE models and experimental results were then used to assess the adequacy of the effective width method in Eurocode 3 (EC3) and Direct Strength Method (DSM) in estimating the design capacity of a wide range of conventional and optimised design CFS channel column sections. The results indicate that Eurocode 3 provides conservative predictions (on average 21% deviation) for the compressive capacity of plain and lipped channel sections, while in general DSM predictions are more accurate for lipped channels. A comparison between FE predictions and tested results show that geometric imperfections can change the FE predictions by up to 20% and 40%, respectively, for lipped and plain channel columns, while the strain hardening effect at the rounded corner regions of the cross-sections is negligible. The results also confirmed that the proposed numerical model is able to provide a consistent and reliable prediction on the efficiency of a previously proposed optimisation methodology.