A business credit card gives your business access to a credit line that can be used repeatedly to make purchases, or even to withdraw cash. Business credit cards are relatively easy to obtain and don’t require collateral (most commonly your house or car) to secure the credit line. However, business owners must personally guarantee the credit card, meaning you agree to be personally liable for the amount borrowed on the credit card.
There are many business credit cards to choose from in Canada, with most banks and providers offering one or more options. Your business spending habits and the credit card terms should be the basis for your business credit card selection. Our guide will help you learn more about business credit cards and how to choose the best one for your business needs.
BMO Cashback Business Mastercard
BMO Cashback Business Mastercard
Purchase interest rate
Eligibility criteria, terms and conditions, fees and charges apply
BMO Cashback Business Mastercard
Apply today and get 6% cash back on gas, office supplies, cell phone bills and internet bills for the first 4 months.
Purchase interest rate: 19.99%
Cash advance rate: 22.99%
Annual fee: $0
Credit rating: 650+ recommended credit score
Minimum age: Age of majority in province/territory of residence
There are many benefits to choosing a business credit card to finance your business. These benefits include:
Easy to apply and qualify for. A business credit card can actually be easier to obtain than other types of business funding, which makes it a good option for businesses without an established credit history. You can often apply online with some basic business and personal information and find out instantly whether your application has been approved. Alternatively, you can visit your bank to apply for a business credit card or contact them via telephone.
Earn rewards on business purchases. A business rewards credit card is perfect if your business spends a lot of money each month, especially in categories like office supplies or business travel. You can earn cash to reinvest into your business or travel rewards to offset the cost of your business trips.
Separate business and personal finances. Using your personal credit card for business purchases means you have to spend a lot of time reviewing and separating out purchases for tax and accounting purposes. Using a business credit card as the sole source of funding for business expenses reduces the amount of time you spend organizing both your personal and your business finances. You can easily track your expenses and payments for tax purposes.
Alternative to business loans. A business credit card gives you constant access to funding that you don’t have to reapply for each time you need to make a new business purchase. While you may use business loans to fund larger business purchases, a business credit card can be useful for recurring expenses as well.
Help build business credit. In the future, your business may need to apply for larger loans. Using a business credit card – and making your payments on time – can help build your business credit to allow you to qualify for more credit in the future.
Not every business or business owner will benefit from having a credit card. As you decide whether your business really needs a business credit card, here are some factors to consider. A business credit card is right for you if:
You want to establish business credit for your business. Having a positive business credit history will improve your ability to get approved for bigger business loans in the future. A business credit card is often the easiest way to jumpstart your business credit.
You want to have a higher credit limit for business spending. Business credit cards usually have much higher credit limits than personal credit cards. This gives you additional purchasing power without having to constantly make payments on your credit card to free up available credit. Make sure your business income can handle the responsibility of a higher credit limit.
You need a way to keep your business expenses separate from your personal expenses. Intertwining your business and personal funds makes your accountant’s job much tougher. If you are your own accountant, you’ll appreciate having your business expenses separated and easily accessible. This will make filing taxes a much less stressful experience.
You have employees, contractors or a partner who needs access to company funds. Each person can have a business credit card with their name on it that is linked to your business credit card account. With some business credit cards, you can set spending limits for each individual to prevent them from abusing company funds. Keep in mind that your business will be responsible for any purchases your employees make with the business credit card.
Your business has many expenses that can earn business credit card rewards. You can earn cash rewards to contribute to your bottom line or generate travel rewards that can be used to offset your business travel costs. Some business credit cards allow you to receive over $6,000 in annual rewards.
Conversely, a business credit card may not be a good choice for you under certain circumstances, such as:
You’re a sole proprietor and don’t have a large amount of business expenses. If you don’t have much business spending, a business credit card may not be helpful for your business. It’s unwise to increase your spending simply to justify having a business credit card. When the need for a credit card arises, you can reassess your decision to get a business credit card at that time.
You don’t believe it’s necessary to build business credit for your business. Depending on your business goals, your business may never need to have an established credit history.
Business charge card vs. business credit card
One of the biggest decisions to make when you’re choosing a business credit card is whether you want a charge card, which requires you to pay your balance in full each month, or a credit card, which gives you the flexibility to pay your balance over a period of time.
Business charge cards may offer better rewards, but can charge high interest rates if you don’t pay your full balance on the due date each month – a risky option if you aren’t quite sure about your revenue flow each month.
Business credit cards often have competitive interest rates and some level of rewards with the convenience of being able to make monthly payments on your credit card balance.
While a credit card gives you the flexibility to pay off your debt over time, a charge card forces your business to spend only what it can afford to pay off in one month’s time. A charge card allows your business to avoid taking on too much debt, however charge cards are not as frequently used in Canada. Some businesses may find it more convenient to choose a business credit card and simply pay the balance in full each month. That way, you have the option of carrying a balance when you need to.
One of the main concerns regarding business credit cards is how to establish credit. The first thing you should do when trying to establish your business credit is to ensure that all payments made to your various vendors are being reported to the credit agencies. Without any business credit, you will be using your personal credit to secure any business debt. Keeping your business and personal finances separate will help reduce any personal credit risk.
Considering that most credit cards require personal guarantees, it’s nearly impossible to completely cut out any personal liability. Use this to your advantage to improve both your business and personal credit scores. Keep in mind that if you miss a payment or use too much of your available credit, that would hurt both your personal and business credit scores.
There are many factors to consider as you choose a credit card for your business. Weigh these factors carefully to choose the right business credit card the first time around.
Annual fee. Paying an annual fee may be an acceptable cost of having a business credit card if the perks are worth it. The annual fee on business credit cards can be as high as $450, although some credit cards waive the fee in the first year. Compare credit cards based on the annual fee, but also consider the other benefits the credit card provides. Just because a credit card has a high annual fee doesn’t mean it’s not the right credit card for your business.
APR. The annual percentage rate, or APR, is most important on credit cards when you don’t pay your balance in full each month. Higher APRs mean that you’ll pay more interest on your balance. Lower interest rates allow to you minimize the cost of borrowing money using a credit card.
Promotional interest rate. An introductory promotional interest rate gives you a chance to make interest-free purchases or transfer a balance and avoid paying interest for a certain number of months. Pay close attention to the terms of the interest rate promotion to decide whether it’s something that benefits your business. Note that since consumer credit card laws do not apply to business credit cards, there is no legal requirement for promotional rates to last a certain amount of time. Rates generally last from three to twelve months.
Rewards. As with personal credit cards, the rewards can be in the form of cash back, miles or points. The credit card may offer higher rewards in certain categories like office supplies or travel. Choose the business credit card that pays the most rewards in the categories in which you spend the most money.
Foreign transaction fees. If you plan to use your business credit card during international travel or use it for making purchases with companies outside of Canada, foreign transaction fees can add up. A business credit card with no foreign transaction fee is ideal because it allows you to avoid this expense.
Sign-up bonus. Many business rewards credit cards offer a generous sign-up bonus that pays a lump sum of rewards if you meet spending requirements. Some cards even offer cash back bonuses as sign up rewards. Consider whether your business spends enough to earn the sign-up bonus. Otherwise, choosing a credit card with other perks is likely a better option.
Premium benefits. Rewards aren’t the only perks that business credit cards offer. You can get access to priority airline boarding, waived checked bag fees and other benefits. Carefully review the benefits offered by the business credit card and evaluate whether your business can take advantage of those benefits.
Read the fine print. The business credit card agreement is a contract between you and the credit card issuer. You should read and understand it like any other business contract. If there are terms you don’t agree with and can’t avoid, consider a different business credit card.Back to top
Applying for a business credit card
Applying for a business credit card isn’t much different from applying for a personal credit card. You may have to provide additional information, but the process is fairly straightforward and not nearly as complicated as applying for a business loan.
If you are a sole proprietor – that is, a person who owns and runs the business – you can still apply for a business credit card, but remember that you are personally liable for your business debts. That’s because you and the business are the same. As a sole proprietor, when you apply for a business credit card, the credit card issuer will use your personal credit and income information to make a decision about your application.
Step 1: Select the best business credit card for your business Review and compare business credit cards based on the cost and terms of the credit card and your business needs.
Step 2: Complete the credit card application The specific information required will vary by credit card issuer, but in general, you’ll need to provide:
Legal name for your business (even if you do business under your own name)
Number of years the business has been active
Business address and phone number (if they’re different from your home address and phone number)
Number of employees
Line of business
Annual business revenue (be truthful in this answer, as falsifying your income can constitute illegal credit card fraud)
Nine digit tax identification number (unless your business is a sole proprietorship and you do not have a tax ID number)
Step 3: Provide any necessary business documents To completely process your application, the credit card issuer may ask for additional documents to verify your business. This may include business bank statements, business licenses or utility bills.
Step 4: Get the credit card issuer’s decision and start spending Once you’re approved and you receive your business credit card, call the credit card issuer to activate the card and then you’re free to start spending. Always keep up with your credit limit, especially if there’s a fee for exceeding the limit. Review your credit card statements each month and make your payments on time to keep your account in good standing with the credit card issuer.
In your search for a new business credit card, you may be surprised to realize that it can be quite difficult to get approved without signing a personal guarantee. A personal guarantee is similar to co-signing for someone’s credit card, except that in this case, you are the co-signer for your own business credit card. You are agreeing to be personally responsible for your business’s credit card debt if the business fails to make payments on the credit card, which means the card issuer can come after your personal assets if the business defaults on the debt.
It’s very difficult to find a business credit card that doesn’t require you to sign a personal guarantee. So if it is imperative that you keep your personal and business finances completely separate, it’s advisable to search out a different form of business credit.
Choosing a business credit card isn’t a decision you should take lightly. If you select the wrong business credit card, it could result in a disaster for your business’s finances, and even your personal credit in some cases. Here are some things to watch out for with business credit cards.
Paying interest is an additional business cost. With a business credit card, interest is a factor that you need to account for in your financial documents.
Credit cards are only subject to a voluntary code of conduct. Only a voluntary code of conduct applies to credit cards in Canada, meaning banks and providers technically don’t have to abide by the code. The code of conduct outlines appropriate restrictions on interest rate increases, which means card issuers can change the credit card rate often and without notifying you too far in advance of the rate increase. Fee caps may also be changed on credit cards with a short notice.
Positive payments may not appear on your credit report. Credit reporting with business credit cards varies, with some credit card issuers reporting both positive and negative account details and others reporting only negative details like missed payments.
Your personal credit score is required as well. Even though you’re applying for a business credit card, most credit card issuers will also inquire into your personal credit score as well. If you have a bad personal credit history, your application for a business credit card may be denied.
Personal liability. Since most business credit cards require a personal guaranty, you are on the line for the credit card payments if your business cannot afford to repay the balance.
Avoid applying for too many business credit cards. The more credit cards you have, the easier it is for your business to get into debt. Since you may be personally liable for your business debts, it’s important that you take precautions not to overextend your business by taking on more credit cards than your business needs.Back to top
Frequently asked questions
A collateral deposit is money put upfront by you in order to secure your business credit card. A collateral deposit is typically only required for a secured credit card.
Yes, but only interest on business expenses are tax deductible. Any charges made toward personal expenses are not deductible. You should check with the Canada Revenue Agency (CRA) for eligibility requirements. Adequate records should be kept to verify any interest charged and if/when payments were made throughout the tax year.
While the terms are often used interchangeably and both cards function similarly, the main differentiator is the size of the business. Smaller businesses would get a business credit card, and larger companies would get a corporate credit card. Another major differentiator is that a corporate card does not rely on an individual’s credit history to secure the card; it is issued based on the company’s finances. Business credit cards are typically used by small business owners, and corporate cards are used by the many employees of a large company.
Jeremy is finder's Global Head of Publishing & Editorial. Jeremy has been with finder since the very beginning and is part of the founding team working closely with Fred and Frank to build finder.com into the comparison network it is today.
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