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How to Choose a Business Credit Card?

Published by My Rate Compass Team | Updated Apr 29, 2020
How to Choose a Business Credit Card?

Did you know that small businesses comprise 98.2% of all Canadian companies? With these numbers, getting appropriate funding is key for business and economic expansion. A business credit card is a good option for a start-up looking for additional funding or a small business that has plans for expansion. In addition, getting a credit card for business is a good way to establish credit history under your company’s name.

Remember the following when choosing a business credit card:

  • Separate your business expenses from your personal expenses. Use your business credit card only for business transactions, not for personal spending.
  • Business credit cards usually have a higher credit limit than personal credit cards.
  • If possible, issue your staff with a business credit card, so that you can easily track their individual business spending.
  • How you use your credit card for business will affect the your company's credit report. Use it wisely.

 

Tips to find the right credit card for business

Finding the right business credit card can be complex, but these tips will make it easy:

Check your credit score.

First things first. Ensure that your credit score matches the requirement needed for your business credit card.

Avoid a hard inquiry on your credit report by knowing your personal and business credit scores before application. It makes no sense   to apply for a business credit card that requires a score of 750 (excellent) when you know your score is only 600 (fair).

Your personal and business credit scores determine the creditworthiness of your business. You can separate your business credit score from your personal score by opening a credit card account under your business name. To learn more about credit scores, read our article on credit score 101.

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Assess your spending habits.

Ask yourself: Do I plan on carrying a balance or paying it full each month?

Answer it honestly. If you plan on carrying a balance, then low interest rate credit cards should be right for you.

 

Check your operating costs.

Examine your business expenditures. What are your two or three biggest business spends for the past 6 months?

Look for credit cards that provide the best rewards in those categories.

For example, if your company spends more money on communications, then consider credit cards with cashback or rewards on phone plans. If you shop across the border or constantly travel in the United States, U.S. dollar credit cards help you save money from currency exchange rates and fees. Airline rewards credit cards are ideal for entrepreneurs who regularly travel for business.

 

Know the different types of credit cards.

There are different types of credit cards for different business needs. Corporate cards are for large businesses with many employees. These cards often come with free employee cards that make it easier to track the spending activity of your staff.

Low-interest rate cards are for entrepreneurs who need additional capital but still can’t pay their balance in full each month. We have an article that will help you learn more about the different types of credit cards in Canada.

Consider business cards with annual fees if…

Credit cards with annual fee usually have higher rewards. On the other hand, if you are not after the rewards, then no annual fee cards might just be a better option for you.

 

Visit online business credit card comparison websites.

A comparison website makes it easier for you to compare interest rates, rewards, annual fees and terms of business credit cards side by side.

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My Rate Compass is a Canadian personal finance portal helping consumers make the most informed financial decisions and take control of their finances through financial literacy. We offer tools, articles, and resources to inform, educate, and provide advice on credit cards, mortgages, loans, RSPs, GICs, TFSAs, bank accounts and credit scores.