When to Get a Business Credit Card in Canada?

Having a credit card in Canada is a huge relief as it works as a revolving credit line. 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 that relaxation to pay at a later date gives the freedom to pay to the credit card user. These benefits can be quite attractive for business owners who can enjoy the perks of credit cards. Small business owners usually prefer to use their personal credit cards to conduct business transactions as well.

When is it appropriate to apply for a business credit card? When personal credit cards work technically 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 the users to get a business credit card are shared below:

Separate personal and business expenses:

Paying the business expenses from your credit card is possible. However, it makes it difficult to keep track of business and personal transactions. Of course, you need a layout of business expenses to compile the data into a journal and an income statement to monitor the business progress.

This is when 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. It saves you time and energy that you otherwise spent on separating the two payments from your personal account statement.

Taxation:

When you need to file the papers for tax purposes, then it is necessary to report all business expenses. Failing to do so might result in higher taxes because of missing the business expenses on record. 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 aspect, 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. In addition, the business person won't have enough time to go out to restaurants to avail of the discounts (on personal credit cards). This is how such persons realize that they are wasting the current benefits because they won't fit in their business needs, and that is when they apply for a business credit card. Business credit cards offer them the benefits that suit their business needs and can be availed easily.

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 only with a business credit card, where you can apply for other authorized users' credit cards or employee credit cards (for corporations). Such credit cards can be monitored and tracked down by the principal user. They help the owners keep track of the spending of employees, which makes it easy to report the expenses in business ledgers and also maintain a fine record of business expenses.

Business credit card becomes even more desirable when you are running a corporation. It is because in corporations, you have plenty of employees who you need to authorize for business spending, and it becomes super difficult 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 a piece of cake. You need to keep all records updated to track down all business activities. The monitoring part is necessary to make sure that the business is in line 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. It is so because, with a business credit card, you get an additional expense tracking service, which helps you to efficiently maintain the record. 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.

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 quite attractive and motivate business owners to apply for a credit card to get access to these amazing 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:

If you want your employees to make business transactions without the fear of liability, then having a business credit card is a must. It is because the authorized user cards and employee credit cards do not come with the liability to pay back the debt. This allows the users to spend as per business needs without the worry or stress that if the business fails to pay back, then they can be held accountable. Such measures are necessary for businesses to show their employees that they do consider their peace of mind. This relaxation and peace of mind are necessary to ensure workplace satisfaction and improve employee performance.

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 save employees from this temptation and reckless spending, considering that the business will have to repay the debt requires you to have a business credit card. For employee credit cards applied for a business credit card, the points earned are referred 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. Rather, 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.