What Businesses Need to Consider When Looking for a Company Credit Card

By Alyssa Furtado

For Canadian businesses – big and small – credit cards offer a great way to boost and keep track of company cash flows, simplify the bookkeeping process and can sometimes build corporate credit history.

Start-ups and bootstrapped business, in particular, stand to gain from using credit cards, as they offer a mechanism to unlock new funds and cope during periods of uneven revenue while also being considerably easier to access compared to a traditional business loan or line of credit. Plus, most credit cards offer rewards for every dollar you spend towards your company, which can be reinvested into the business or offset costs.

To find the right credit card for your business, you will have to consider a number of factors including your company’s size and structure, spending profile as well as what type of rewards would add the most value to your business.

Structure

If your business is incorporated and operating costs are high, you will want to consider signing up for a full-fledged business credit card. Compared to a run-of-the-mill personal card, business credit cards are not available to the general public and have notably higher credit limits. In turn, the process of qualifying for a business credit card involves more steps and may require additional documentation, such as a letter of incorporation. It is important to keep in mind that unless your business is well established with multiple years of financial statements, a business credit card will still likely need to be secured personally, which means the business owner would need to assume personal liability for all spending.

On the other end of the spectrum, if your business is not incorporated or your expenses rarely surpass four figures, using a personal credit card to pay off your business expenses may be a viable option – under the strict condition you use the card solely for business purchases and not your own. Even if it’s a personal credit card, you will have to treat it as a dedicated business credit card and keep your company and personal expenses separate – otherwise you risk complicating your financial records and tax filing process. The lower limit, offered by personal credit cards, can also help ensure you avoid overspending or face a situation where you’re carrying a balance.

Spending profile

Much in the same vein of how Canadian businesses are striving to offer more personalized solutions and products, the best credit cards in Canada have become increasingly targeted in their rewards offerings. If your business incurs a lot of expenses in certain categories, you will want to select a card that offers more rewards for that type of spending.

For example, if travelling by car to meet with suppliers, business partners or clients are routine and critical to your business’ success, you will want to consider signing up for a card that offers extra rewards for every dollar spent at gas stations. However, if fostering new relationships with clients is usually done over dinner and team power lunches are a company ritual, a card that offers bonus rewards for restaurant purchases should be your top consideration.

Moreover, if many of your routine business purchases (such as office supplies and computers) tend to be from the same retailer, you should strive to find a card that allows you to earn additional rewards for shopping at that particular vendor.

Lastly, if you’re in a line of a business where a number of your suppliers are located south of the border, you will want to a consider a credit card that waives the 2.5% foreign transaction fee typically charged on credit card purchases made in US dollars or other non-Canadian currencies.

Rewards programs

Along with maximizing how you earn points, you will have to decide on which type of rewards card is best for your business: a travel credit card or cash-back card.

Aptly named, travel credit cards offer points that can be redeemed for a number of travel-related rewards (including free or discounted flight tickets and hotel rooms) and are an ideal option if cross-country and overseas business trips are constants in your company. Some travel cards offer points that can only be redeemed at select airlines or hotels. Therefore, if you prefer staying at a specific hotel chain or are already a member of an airline’s frequent flyer program, you’ll want to pursue a card which offers points that are redeemable at those select airlines or hotels.

In contrast to travel cards, cash back credit cards rebate a percentage of purchases made through a card and are a more viable choice for businesses where travel is not a major factor or a sporadic expense. Cash back cards are also ideal for leaner business which are in search of ways to earn a straight-forward savings on their purchases and improve cashflow.

In addition to earning points or cash back, many credit cards feature a number of side perks such as concierge services, airport lounge access, emergency travel insurance and car rental discounts. Make sure to read the fine print to ensure you select a credit card which offers perks which will add the most value to you and your employees.

Regardless of the type of rewards card, it’s important to keep in mind that businesses that don’t use a credit card on routine expenses are losing out on the opportunity to earn rewards on every dollar they spend towards their company.

Another key credit card feature to look at are balance transfer rates. A number of cards offer special rates as low as 0.99% on transferred balances for a limited time – usually the first six months that you possess the card. This can be used to consolidate and manage older company debts or payments, and in turn, go a long way in helping early stages businesses. However, you will have to ensure the transferred balance can be paid off in full before the special rate ends and the standard interest rate comes into effect. Plus, it is important to note that any payments you make towards your credit card statement will automatically apply to the transferred balance first and not new expenses, which will be subject to the standard interest rate. Therefore, you will want to prioritize using the card to pay off old debts and not earning rewards on new purchases.

Interest charges

While we have gone into some detail about the benefits credit cards offer, and how to pick the right card for your company, one of the single most important things for businesses to consider are interest payments. A credit card is only as good as your ability to pay off the statement balance in time, so it is important to be aware of the repercussions of being charged interest and carrying balances month-to-month.

Alyssa Furtado is a passionate entrepreneur, financial expert, digital marketer and educator. She is the co-founder of Ratehub Inc. and CEO of Ratehub.ca, the leading Canadian financial website for comparing the best credit cards, mortgage rates, deposit rates and insurance rates.

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