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Business credit cards are offered to small and large companies that need capital to fund their operations or to increase their cash flows. This is a type of short-term borrowing instrument to pay for office supplies, gas, business-related services, and other expenses. Customers are given the opportunity to borrow up to their limit and at a point of sale. The limit is pre-set and depends on the customer’s payment history, credit rating, and other factors.

There are many products offered on the Canadian market, including the RBC Visa Business and the American Express Business Gold Rewards Card.

Benefits for users

There are many benefits for companies, and one is that payments made on a card simplify accounting. It is easier to manage travel and office-related expenses and buy supplies and equipment. This is possible because business cards come with higher spending limits compared to personal ones. Some products have a limit of $50,000 or higher which allows companies to make large purchases. This is more convenient than using cash, a debit card, or a personal credit card. Controlling employee spending is another benefit for companies, especially businesses with many employees.

These cards allow companies to set limits and control spending on a regular basis. They can review monthly statements or check their transactions and payments online. Having separate business credit is beneficial in many ways. The personal payment history and rating of the owner is not reflected in the company’s transactions. Paying taxes is made easier because owners do not have to sort out their personal and business payments and transactions for tax purposes.

Small company owners benefit from making payments on a card. Online use, convenience, and less stringent lending criteria are obvious benefits. Companies find it easier to qualify for a card than for a loan or line of credit. This is especially true for start-ups and those that do no have credit exposure. Convenience is also an advantage. Companies can make payments and cash withdrawals at any time. This is easier done than writing checks or looking for other sources of cash.

Perks and online banking

Perks are another benefit for companies and include discounts on office supplies, travel, hotel stays, rental cars, and other goods and services. Canadian banks feature a wide variety of perks such as guaranteed returns, car rental insurance coverage, trip cancellation insurance, cell phone replacement guarantee, and many others. Roadside assistance, price protection, and emergency travel assistance are additional benefits. Emergency travel assistance is a perk offered with many cards, and some services are free-of-charge. One example is translation. However, holders are charged for services such as international hospital stays and obtaining a new passport. Free currency conversion is one perk to take advantage of when going on vacation or a business trip. Note that some cards charge foreign transaction fees which will add up to your travel-related expenses. There are some issuers that offer products with no foreign transaction fees.

The fact that many issuers offer phone and online banking is an additional benefit. Companies do business with suppliers, contractors, vendors, and other parties online. Online banking has become popular because it makes financial transactions easier and faster. In addition to convenience, online banking is safe and secure, and you don’t have to visit a local branch or wait in line. Company owners can monitor investments, view balances, transfer funds to partners, pay bills, and even order checks.

Assistance with financial bookkeeping is offered by many companies and banks. There are different online tools for expense management, bookkeeper tracking, and year-end account summery. Using professional help makes it easier to monitor business-related spending, pay taxes, and navigate audits.

Using a business card to build credit

In addition to incentives and rewards plans, issuers offer tools to improve or build credit. Using a business card frequently and paying the full balance allows companies to build their credit history. This helps companies to qualify for other sources of financing, including loans, lines of credit, and others. Financial institutions are willing to offer low interest rates and attractive terms on secured and unsecured loans.

Downsides of business cards

One downside is that this product is more expensive than fixed-rate credit lines and bank loans. Interest charges accumulate quickly if business owners pay the minimum only. In fact, more than 2/3 of businesses carry a balance on a regular basis. Exceeding the available limit can result in penalties and late fees. Thus, company owners should monitor their spending carefully. Another downside is that holders are required to sign a personal liability agreement. This serves as a guarantee that the outstanding balance will be repaid. Late and missed payment as well as nonpayment may affect the borrowers’ credit scores, thus limiting their access to different sources of financing. While some financial institutions are willing to extend loans to companies with tarnished credit, they offer high interest rates. Security can be a problem, especially if employees are using business cards. Personal and financial information can be stolen from competitors, contractors, vendors, employees, and other parties. It is important to track employee spending to ensure that they don’t use company cards for personal expenses. Check for items such as groceries, car rentals, vacation packages, household appliances, and others. Make sure that only authorized users have access to business funds. It is important that employees take precautions when making payments and financial transactions. This is a way to avoid identity theft and being hacked by con artists, scammers, phishers, and other criminals.

Types of business cards

There are different financial products to choose from, including cards offered by Visa, MasterCard, and American Express. Issuers offer prepaid, secured, charge, unsecured, and other types of products. Unsecured cards, for example, are offered to established businesses with an excellent and good credit rating. The available limit varies depending on a number of factors, including annual revenues, payment history, years in business, cash flows, and many others. This type of product is a good choice for owners that wish to earn rewards points and other perks.

Top 5 Business Credit Cards

Scotiabank®* American Express® Card

This card offers the opportunity to earn rewards points on purchases and services, including entertainment, dining, grocery shopping, and gas. Holders earn 4x bonus points for each $1 in purchases and are offered discounts on cruise packages, plane tickets, hotel amenities, and more. Scotiabank offers a flexible redemption program and travel insurance coverage as well as hotel and travel privileges, concierge service, and a lot more. Customers also benefit from car rental discounts, cruise upgrades, and shipboard credits.

  • Credit limit: $10,000 or higher
  • Annual fee: $399
  • Interest rate: 19.99 percent
  • Interest-free period: min 21 days

American Express® Business Gold Rewards

American Express also offers a business rewards card that earns 1 bonus point on each dollar in purchases. Supplementary cards also earn points, and there is a welcome bonus worth 30,000 rewards points. There is an option to transfer the points earned to other programs, including loyalty and frequent traveler programs. Points can be redeemed for brand name merchandise, gift certificates, and gift cards.

  • Interest rate: 30 percent on delinquent charges
  • Annual fee: $250
  • Grace period: 28 – 31 days

National Bank of Canada MasterCard® Business Card

This card by NBC goes with plenty of add-ons and is designed for businesses and self-employed workers. Holders benefit from a low promotional rate of 3.9 percent valid during the first 6 billing cycles. The promo rate applies to cash advances and balance transfers which makes this offer an attractive balance transfer card. Those who have a business bank account can link it to their credit card to avoid overdrafts.

  • Interest rate: 19.99 percent
  • No annual fee
  • Credit limit: $1,000 or higher

RBC® Business Cash Back MasterCard

The Royal Bank offers a card with cash rebates and no annual fee to its business customers. Holders earn 2 percent back during the first 3 months. They also get 1 percent back on all eligible purchases. Standard and optional benefits such as travel insurance and extended warranty are also offered. The card allows customers to keep their personal and business expenses separate and helps owners manage their expenses and cash flows.

  • Interest rate: 19.99 percent
  • Cash advance rate: 21.99 percent
  • Annual fee: none
  • Free supplementary cards

ScotiaGold Passport for Business VISA® Card

Scotiabank offers two options with different credit limits – an unsecured card with a limit of up to $50,000 and a secured one with a limit of up to $500,000. Businesses enjoy special discounts and benefits such as rewards points to be redeemed for credit and investment vouchers, gift certificates from select merchants, brand name merchandise, and attractive travel offers. Instant cash advances and access to mini statements are added benefits.

  • Purchase rate: 19.99 percent
  • Annual fee: $120
  • Annual fee waiver: 50 percent