Finding the best business credit card in Canada

Navigating the world of business credit cards can be daunting for Canadian entrepreneurs, large corporations, and small business owners. Businesses have a lot of expenses to manage operations and support their growth. With many credit card options available, each boasting various rewards, perks, and terms, finding the best business credit card to suit your business needs requires careful consideration and thorough research.

From cash back incentives and travel rewards to low-interest rates and extended credit limits, the right business credit card can significantly enhance your company's financial management and operational efficiency. This blog guides you through the essentials of business credit cards, ensuring you make an informed decision that aligns with your business goals.

What is a business credit card?

A business credit card is a financial tool designed specifically for businesses rather than individuals. It allows business owners and their employees to make purchases and manage expenses in a way that separates personal and business finances.

These cards typically offer features and benefits tailored to meet the needs of businesses, such as higher credit limits, expense management tools, and rewards programs geared towards business-related spending categories like office supplies, travel, and dining.

Business credit cards can help build the business's credit history, which can be beneficial for securing loans or favourable terms in the future for operations and business expansions. A business credit card often comes with additional perks, such as extended payment terms, detailed expense reporting, and the ability to issue multiple cards to employees with individual spending limits.

Overall, a business credit card can provide a convenient and efficient way to manage a company's finances, streamline accounting, and take advantage of rewards and incentives designed for business use.

Types of business credit cards

There are two types of business credit cards: small business credit cards and corporate credit cards. Choosing the right business credit card can significantly impact your company's financial management and operational efficiency. Various types of business credit cards are available, each designed to cater to different business needs and spending habits.

Understanding their distinct features and benefits can help you select the best business credit card that aligns with your business goals.

Small business credit card

A small business credit card is a financial product specifically designed to meet the needs of small business owners and entrepreneurs. These cards offer features and benefits tailored to help manage and streamline business expenses, separate personal and business finances, and often provide rewards or incentives for common business-related purchases. Small business credit cards typically come with higher credit limits than personal credit cards, which can be crucial for managing larger business expenditures.

In addition to higher credit limits, small business credit cards often offer expense tracking tools, detailed monthly statements, and the ability to issue additional cards to employees with customizable spending limits. These features help simplify bookkeeping and expense management.

Many small business credit cards also come with rewards programs, offering cash back, points, or travel miles for purchases in categories such as office supplies, travel, and dining. Overall, a small business credit card is an essential tool for small business owners looking to improve their financial management, build business credit, and take advantage of rewards and perks tailored to their business needs.

Corporate credit card

A corporate credit card is a financial tool issued to large companies and organizations, designed to manage and streamline business expenses across multiple employees and departments. These cards are typically provided to employees who frequently incur business-related expenses such as travel, accommodation, client entertainment, and office supplies.

Corporate credit cards help control overspending, facilitate expense tracking, and ensure a clear separation between personal and business expenditures. Corporate cards have features tailored to the needs of large organizations, including detailed expense reporting, integration with accounting software, and the ability to set individual spending limits for each cardholder. They often offer enhanced security measures, such as fraud protection and liability waivers for unauthorized charges.

Additionally, corporate credit cards may provide rewards programs, offering points, cashback, or travel benefits that can be redeemed to offset business expenses. By centralizing and monitoring spending, corporate credit cards help companies improve financial oversight, streamline reimbursement processes, and leverage purchasing power to secure better terms and discounts from suppliers.

Business credit cards vs. personal credit cards

When deciding between business and personal credit cards, it's important to understand the distinct differences and advantages each type offers. While both serve the fundamental purpose of providing a line of credit for purchases, they cater to different financial needs and come with features tailored to their respective user bases.

Here’s a breakdown of how business credit cards differ from personal credit cards.

Credit limits

Business credit cards are designed to support the financial demands of a business, which often include larger and more frequent expenses than those typically incurred by individuals. As such, they tend to offer significantly higher credit limits. This higher limit helps businesses manage cash flow more effectively, make substantial purchases, and cover operational expenses without maxing out the credit line.

Personal credit cards generally offer lower credit limits, reflecting the usual spending capacity and needs of individuals. While personal credit card limits can be increased over time with responsible use and good credit history, they are typically much lower compared to business credit cards. It makes personal credit cards less suitable for handling large, frequent transactions often required by businesses.

Expense management tools

Business credit cards in Canada often come with robust expense management tools that are invaluable for businesses. Features such as detailed monthly and yearly spending reports, category breakdowns, and integration with accounting software (like QuickBooks) are common.

While some personal credit cards offer basic expense tracking and budgeting tools, they generally lack the advanced features of business credit cards. Personal cards are intended for individual use and don’t include multi-card management or sophisticated reporting tools. Users can track their spending through statements and sometimes through basic budgeting apps provided by the card issuer.

Rewards and perks

The rewards programs for business credit cards are tailored to the spending habits of businesses. Common reward categories include office supplies, business travel, dining, and advertising. These cards might offer higher cashback percentages or more points in these categories compared to personal cards. Additionally, business credit cards often come with perks like travel insurance, airport lounge access, and discounts on business services.

Rewards programs on personal credit cards are designed to appeal to individual consumers. Categories often include groceries, gas, entertainment, and dining. Personal cards might offer points, miles, or cashback in these everyday spending categories. They also come with perks such as purchase protection, extended warranties, and travel insurance, but these benefits are usually geared toward personal use rather than business needs.

Building credit

Using a business credit card responsibly helps build the credit history of the business itself, separate from the owner's personal credit. This can be beneficial for securing business loans, better terms with suppliers, and other financing opportunities in the future. Establishing a good business credit score is crucial for the growth and scalability of a business.

Personal credit cards build the individual's personal credit history. Responsible use, such as making timely payments and keeping credit utilization low, positively impacts the cardholder's credit score. A good personal credit score is important for obtaining personal loans, mortgages, and favorable credit card terms.

Legal protections

In Canada, business credit cards do not benefit from the same level of legal protection as personal credit cards. While there are general consumer protection laws that apply to all credit products, such as disclosure requirements and fair lending practices, business credit cards are often exempt from specific consumer protection provisions. For example, business credit cards may have higher fees and interest rates and may not be subject to the same regulations that cap fees and mandate clear billing practices.

Personal credit cards in Canada are subject to robust consumer protection regulations. These include the requirement for transparent disclosure of terms and conditions, caps on certain fees (such as over-limit and late payment fees), and mandatory grace periods for interest-free payments on new purchases if the balance is paid in full. These protections are designed to ensure that consumers are treated fairly and have the necessary information to manage their credit responsibly.

Liability

Liability for business credit cards varies depending on the issuer and the card agreement. Some business credit cards require a personal guarantee from the business owner, meaning they are personally liable for the debt. However, some cards may offer limited liability for unauthorized transactions if the business has taken appropriate steps to prevent fraud.

With personal credit cards, the cardholder is always personally liable for all charges and debts incurred on the card. This liability extends to any authorized users on the account, meaning the primary cardholder is responsible for the balance regardless of who made the purchases.

Application process

Applying for a business credit card often involves providing detailed information about the business, including financial statements, tax ID numbers, and sometimes personal guarantees from the business owners. The application process assesses the creditworthiness of both the business and all owners, making it potentially more complex than applying for a personal card.

The application process for a personal credit card is generally straightforward and based primarily on the individual's credit history, income, and financial stability. The process is typically quicker and less involved than applying for a business credit card.

Financial management

Business credit cards are designed to help manage business expenses effectively. They facilitate better financial management by separating business and personal expenditures and providing clearer financial records for tax and accounting purposes. The ability to track and categorize business expenses accurately is crucial for budgeting, forecasting, and financial reporting.

Personal credit cards are intended to manage individual expenses. While they can be used for some small business purposes, personal cards don't offer the same level of financial management tools as business credit cards. Mixing personal and business expenses on a personal card can complicate accounting and tax reporting.

3 benefits to small business credit cards

Small business credit cards offer several advantages that can significantly enhance the financial management and operational efficiency of a business. Whether a small business is a sole proprietorship, a franchise, a partnership, a home-based business, or something else, a good credit card is essential for the financials. Here are three key benefits small business owners can enjoy to help manage and grow their businesses.

Improved cash flow management

For small businesses, maintaining a steady cash flow is critical. Small business credit cards offer a valuable line of credit that allows business owners to make necessary purchases and cover day-to-day expenses even during periods of low cash flow.

With typically higher credit limits than personal cards, these cards provide the financial flexibility needed to manage seasonal fluctuations in revenue, handle unexpected costs, and seize growth opportunities without immediate cash on hand. It can be particularly beneficial for small businesses that might experience inconsistent income or face delays in receivables.

Simplified expense tracking and management

Small businesses often operate with limited administrative resources, making efficient expense tracking and management crucial. Small business credit cards come with tools that allow detailed tracking of expenditures, which simplifies bookkeeping and financial management.

These cards often integrate with accounting software, automating the categorization of expenses and generating comprehensive reports. It saves time and ensures accuracy in financial records. Additionally, issuing cards to employees with individual spending limits helps small business owners monitor and control expenses, providing a clear record of employee purchases and reducing the risk of overspending.

Rewards and benefits specifically for small businesses

The best business credit cards for small businesses offer rewards programs tailored to common business expenses, helping small businesses maximize their spending efficiency. These cards often provide cashback, points, or travel miles for purchases in categories such as office supplies, travel, advertising, and dining.

By earning rewards on everyday business expenses, small businesses can reduce their operational costs or reinvest the savings back into their business. Moreover, many business credit cards come with additional perks like travel insurance, purchase protection, and discounts on business services, which can provide significant savings and added value to small business owners.

Who issues business credit cards?

Some of the best business credit cards in Canada are issued by banks, credit unions, and other financial institutions. These entities offer a variety of options tailored to meet the diverse needs of businesses, ranging from sole proprietorships to large corporations. Major issuers of business credit cards include the CIBC Aeroplan Visa Business Plus credit card, American Express Business Gold Rewards credit card, and the American Express Aeroplan Business Reserve credit card.

Each issuer provides a selection of business credit cards with different features, benefits, and rewards programs. For instance, American Express offers business cards with rewards programs customized for business spending categories like travel, dining, and office supplies. Similarly, other credit card providers have business credit cards with cashback rewards, travel benefits, and flexible points programs, along with features such as employee cards and expense-tracking tools.

Pros and cons of business credit cards

Advantages of business credit cards

Convenient access to funds

Business credit cards provide a readily available line of credit, offering quick access to funds for business expenses, purchases, and cash flow needs. This convenience can be especially valuable during emergencies or when making time-sensitive transactions.

Build business credit

Using a business credit card responsibly can help establish and build the credit history of the business itself. Setting up automatic payments for recurring payments, repaying the balance on time, and understanding your credit report are great ways to build credit. Positive credit history is essential for securing future financing, favourable loan terms, and establishing relationships with suppliers.

Employee spending control

Business credit cards often allow for the issuance of multiple cards to employees, each with individual spending limits. It helps business owners monitor and control employee spending, track expenses, and streamline reimbursement processes.

Expense predictability

With a business credit card, businesses have predictable monthly payments based on their spending habits and credit terms. Predictability can help with budgeting and forecasting, allowing businesses to better plan for future expenses and allocate resources efficiently.

Introductory offers and promotions

Business credit cards often come with introductory offers and promotions, such as sign-up bonuses, 0% APR periods, or waived annual fees for the first year. Taking advantage of these offers can provide immediate cost savings and additional value to the business.

Vendor relationships

Business credit cards can serve as a valuable source of emergency funding for unexpected expenses or cash flow shortages. In times of crisis or unforeseen circumstances, having access to a credit line can help businesses weather financial challenges without disrupting operations.

Business expense separation

Using a business credit card helps separate personal and business expenses, simplifying accounting and tax reporting. Business expenses and revenue are subject to the corporate tax rate. The separation is crucial for maintaining accurate financial records and ensuring compliance with tax regulations.

Cons of business credit cards

Interest charges

Carrying a balance on a business credit card can result in high-interest charges, particularly if the card has a high APR (Annual Percentage Rate). Accumulating interest can increase the cost of borrowing and negatively impact the business's financial health if not managed carefully.

Potential for debt accumulation

The convenience of using a business credit card can lead to overspending and debt accumulation if not used responsibly. Business owners must exercise discipline in managing credit card expenses to avoid falling into debt traps and damaging the business's financial stability.

Annual fees

Some business credit cards come with annual fees, which can add to the overall cost of using the card, especially if the business does not fully utilize the card's benefits and rewards. Business owners should carefully evaluate the benefits of a card against its annual fee to determine its value.

Limited liability protections

While business credit cards offer liability protections for unauthorized transactions, business owners may still be personally liable for certain debts, especially if they have provided a personal guarantee. This exposes personal assets to potential risks in the event of business bankruptcy or default.

Complexity in managing multiple cards

For businesses with multiple employees and cards, managing and tracking expenses across different cards can become complex and time-consuming. Business owners must implement effective systems and processes to ensure proper oversight and control of card usage.

Interest rates on business credit cards

Interest rates on business credit cards can vary depending on several factors, including the issuer, the cardholder's creditworthiness, and prevailing market conditions. Here's a general overview of what to expect regarding interest rates on business credit cards.

Variable interest rates

Many business credit cards have variable interest rates tied to the prime rate, which is the interest rate that banks charge their most creditworthy customers. The card's APR (Annual Percentage Rate) is typically expressed as the prime rate plus a certain percentage, known as the margin.

The specific interest rate you receive on a business credit card is often determined by your business's creditworthiness and financial history. Businesses with stronger credit profiles may qualify for lower interest rates, while those with weaker credit may face higher rates or be offered secured credit cards with higher deposit requirements.

Some business credit cards offer introductory APR periods with low or 0% interest rates for a specified period, typically ranging from 6 to 18 months. After the introductory period ends, the APR reverts to the standard variable rate based on the prime rate.

Factors affecting interest rates

Economic factors and changes in the financial market can influence interest rates on business credit cards. For example, changes in the Federal Reserve's monetary policy, inflation rates, and overall economic conditions can impact prevailing interest rates. Businesses can monitor market conditions like stock prices during recessions and other periods of economic conditions to predict changes in monetary policy and interest rates.

Each card issuer sets its policies and criteria for determining interest rates on business credit cards. Factors such as the issuer's risk assessment, business credit score, and profitability objectives can influence the interest rates offered to cardholders.

How to qualify for a business credit card

Qualifying for a business credit card involves meeting certain criteria set by the card issuer. While specific requirements may vary depending on the issuer and the type of business credit card, here are the typical steps and considerations for qualifying.

Legal business entity

To qualify for a business credit card, you must operate a legally registered business entity. It could be a sole proprietorship, partnership, corporation, or other legal structure recognized by Canadian law. Some card issuers may require a Business Number (BN) issued by the Canada Revenue Agency (CRA) as proof of business registration.

Business financial information

Card issuers typically require information about your business's annual revenue or income. It helps assess your business's financial stability and ability to repay credit card debt. You may need to provide financial statements, such as income statements, balance sheets, or cash flow projections, to demonstrate your business's financial health.

Personal credit history

While business credit cards are intended for business use, issuers often consider the personal credit history of the business owner or principal officer when evaluating credit card applications. Business credit card applications may require a personal guarantee from the business owner, making them personally liable for the card's debt if the business fails to repay.

Business documentation

You may need to provide documentation proving your business's existence and ownership, such as articles of incorporation, partnership agreements, or business licenses. Card issuers typically require government-issued identification, such as a driver's license or passport, to verify the identity of the business owner or authorized signatory.

Creditworthiness

A good personal credit score is often a prerequisite for qualifying for a business credit card. Issuers may set minimum credit score requirements, with higher scores typically associated with better approval odds and lower interest rates. Card issuers may also consider your credit history, including factors such as payment history, credit utilization, and length of credit history, when assessing your creditworthiness.

Business relationship

Having an existing relationship with the card issuer, such as a business banking account or previous credit card, may increase your chances of approval. You'll need to complete a credit card application, providing all required information and supporting documentation as requested by the card issuer.

Important considerations

Before applying for a business credit card, compare offerings from multiple issuers to find the card that best suits your business's needs, including rewards programs, fees, interest rates, and additional benefits. Once approved, use your business credit card responsibly by making timely payments, keeping credit utilization low, and managing expenses effectively to build a positive credit history and maximize the card's benefits.

What credit score is needed for business credit cards in Canada?

Generally, a good to excellent personal credit score is typically required to be approved for a business credit card. Applicants with excellent credit scores are highly likely to be approved for most business credit cards in Canada. They may qualify for cards with the most favourable terms, including lower interest rates, higher credit limits, and premium rewards programs.

Businesses with good credit scores demonstrate responsible credit management and are generally sufficient to qualify for many business credit cards. While approval odds are favourable, applicants with good credit scores may not qualify for the most competitive interest rates or premium rewards programs.

Applicants with fair credit scores may still be eligible for certain business credit cards, but approval may be less certain. Issuers may require additional documentation or consider other factors, such as business revenue and financial history, when evaluating applications.

Businesses with poor credit scores may have difficulty qualifying for business credit cards, particularly those with stringent credit requirements. In some cases, applicants with poor credit may need to consider secured business credit cards, which require a security deposit to establish a credit line. A secured credit card can help you build a credit score after bankruptcy, or if you have no credit score, you can qualify for a small business loan or business credit card in the future.

Can I use my personal credit card for business expenses?

Yes, you can use your personal credit card, personal loan, or line of credit for business expenses, but it's generally not recommended for several reasons. Using a personal credit card for business expenses can make it challenging to separate personal and business finances. It can lead to confusion during tax time, making it more difficult to track deductible business expenses and potentially raising red flags with tax authorities.

Personal credit cards typically lack features and benefits tailored to business needs, such as expense tracking tools, employee spending controls, and business-focused rewards programs. Using a personal card may result in missed opportunities to optimize business spending and manage expenses more efficiently.

Using a personal credit card for significant business expenses can impact your personal credit utilization ratio and credit score. High credit card balances relative to your credit limit can lower your credit score and affect your ability to qualify for personal loans or credit in the future.

Using a personal credit card for business expenses may also result in missed opportunities to claim tax deductions and benefits available exclusively to businesses. Business credit cards often offer rewards, perks, and tax reporting features tailored to business spending, maximizing the value of your business expenditures.

Get a business credit card with KOHO for businesses

Obtaining a business credit card with KOHO for businesses presents a compelling opportunity for businesses seeking a modern and streamlined approach to financial management. With KOHO's innovative platform, businesses can benefit from real-time expense tracking, automated categorization, and customizable spending limits, all accessible through a user-friendly mobile app.

KOHO's business credit card offers competitive rewards programs tailored to business spending categories, helping businesses maximize their purchasing power and earn valuable rewards on everyday expenses. By choosing KOHO for their business credit card needs, businesses can enjoy the convenience, flexibility, and financial insights necessary to plan for spending and saving in today's dynamic business landscape.

Build your credit with KOHO using a virtual credit card and get an emergency line with overdraft protection coverage for unexpected expenses. If you're looking for individual savings products, apply for our high-interest savings account and earn interest on your money.