When to Get a Business Credit Card in Canada?

Having a credit card in Canada can be a huge relief, as it works as a revolving line of credit. Credit cards allow users to delay payment by paying the minimum amount due each month. Although it is better to pay the full amount, still, having the relaxation to pay at a later date gives more flexibility to the credit card user. These benefits can also be quite attractive for businesses that can enjoy the perks of credit cards as well.

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When is it appropriate to apply for a business credit card? When personal credit cards work the same, then why do businesses need a dedicated business credit card?

Well, multiple scenarios require you to have a business credit card to conduct business transactions. Some of these reasons which compel business owners to get a business credit card are shared below:

Separate personal and business expenses:

Paying business expenses from your personal credit card is possible. However, it makes it difficult to keep track of business and personal transactions, and it is not advisable if you can help it. With a dedicated business credit card, you can gather a layout of business expenses and use reporting to guide your strategy for future business spending.

This is why you should get a business credit card. Having a separate credit card for personal and business expenses helps you easily track the costs and report them in monthly statements. This separation of personal and business expenses can also set you up for a less stressful and time-consuming tax return process.

Taxation:

When you need to file the papers for tax purposes, it is important to report all business expenses. Failing to do so might result in you paying higher taxes. This is when a business person realizes the importance of a business credit card. With a dedicated business credit card, all the expense record is automatically compiled in one account, which can be shared for tax purposes to report the business earnings accurately.

Have business-specific credit card rewards:

You might already be aware that both personal and business credit cards have their own specialized reward programs. While personal rewards focus more on personal benefits, business credit card rewards focus more on benefits that can be helpful for your business. Realizing that you are missing out on essential perks that can reduce your costs and offer you great benefits is one of the motivating forces to apply for a business credit card.

To understand this, let us consider an example. Let's say a personal credit card offers discounts on meals, while a business credit card offers free miles. For a business person, free miles are more necessary, and they can reduce the fuel cost spent otherwise on monthly commutes. And what if the businessperson doesn't have enough time to go out to restaurants to take advantage of the discounts (on personal credit cards)? A key part of setting up a business credit card is having perks and rewards that are tailored to the business and its needs. Many companies would benefit more from air miles than, say, discounts on groceries. Finding a card that offers perks that make sense for your business is vital when applying for any credit card.

Multiple users:

If multiple people in your business are authorized to make business purchases, then it becomes quite difficult to keep track of expenses. You won't be able to see if the expenses being reported are business-related or not. To make sure that all the users are responsibly using their credit cards, you need to develop a system where you can oversee their spending. This is possible with a business credit card. You can apply for other authorized users' credit cards or employee credit cards (for corporations). Such credit cards can be monitored and tracked by the principal user. They help owners keep track of employee spending, making it easy to report expenses in business ledgers and maintain a detailed record of business expenses.

A business credit card becomes even more desirable when you are running a corporation. This is because corporations have numerous employees who need to be authorized for business spending, making it challenging to keep track of where these employees are spending. Employee business credit cards give you the authority to keep an eye on spending patterns, which you can also verify and maintain a record.

Efficient expense tracking:

Running a business is not easy. You need to keep all records up to date and track all business activities. The monitoring component is necessary to ensure that the business aligns with the strategic vision. However, tracking down expenses can become quite hectic and cumbersome. In such cases, having a business credit card offers you great ease. This is because, with a business credit card, you get an additional expense tracking service, which helps you maintain records efficiently. It allows you to separate the expenses by type, date, vendor, and other details, which helps you to sort out data from extensive records of business spending.

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Special offers:

Along with benefits and rewards such as travel insurance, free miles, redeemable points, etc., business credit cards also come with special offers. These offers are pretty attractive and motivate business owners to apply for a credit card to get access to these fantastic offers. These offers can vary from bank to bank. These offers include promotional offers that can forego the annual credit card fee or an interest-free debt payment period. You can also get offers that give you more points on spending in comparison to what you get on personal credit cards.

Take liability from employees:

A primary reason for issuing employee cards is to provide a seamless way for staff to make necessary business purchases without forcing them to use their own money and wait for reimbursement. This is not about "taking liability from employees," because an employee using a supplementary business card never has liability for the debt in the first place.

The legal responsibility for all charges made on all supplementary cards always rests with the business and, crucially, with the owner(s) who signed the personal guarantee during the application process. The benefit is operational efficiency and employee convenience, not a shift in legal liability.

Refrain employees from rewards temptation:

If employees are allowed to have personal credit cards for business expenses, then they might be tempted to spend more to earn the points and redeem those points to avail of exciting rewards. To prevent employees from succumbing to this temptation and reckless spending, if an employee uses a credit card, the points earned are credited back to the primary applicant or owner. This way, the points earned by the employees can not be used by them for their personal needs. Instead, the primary cardholder, who is an owner in most cases, will be eligible to use those points. This is why the employees won't be attracted to use the card irresponsibly just to avail themselves of the rewards and benefits.