How to get a business credit card in Canada?

There are a lot of propositions on the banking market in Canada (0 interest credit cards, rewards and travel, secured, VIP, no fee) and each card has many parameters and additional bonuses to be considered before applying for. About these and many other features of the comparison and choosing of a fair business credit card, which will fits your business best - we discuss in this article.

Summary

  1. Step one. What is a business credit card?
  2. Step two. What credit cards suit your business?
  3. Step three. Comparison of business credit cards
  4. Step four. How to get a business credit card?
  5. Step five. Features of using a business credit card
  6. Findings

Getting a business credit card is rather a responsible process for all types of business: small and corporate, entrepreneurs and startups. There are a lot of propositions on the banking market in Canada (0 interest credit cards, rewards and travel, secured, VIP, no fee) and each card has many parameters and additional bonuses to be considered before applying for. Besides, the banks often use promotional interest rates and commissions to attract new clients, which are increased greatly after some period of time. Even if you got a business credit card - your responsibility only increases. Because business credit cards transactions must be checked carefully and regularly, if you don't want fraud to take place. About these and many other features of the comparison and choosing of a fair business credit card, which will fits your business best - we discuss in this article.

Step one. What is a business credit card? 

Business credit cards usually function like private ones and enabling your staff to make business expenses easily and to have a 24/7 access to loan funds in the form of a credit limit. Canadian banks issue these cards in the name of a firm for the director or in plural to its personnel. Such cards also can be provided for entrepreneurs and startups. 

Like personal credit cards, the business ones can give their holders additional bonuses as accumulation of points, discounts on goods and services from partners, cash back, free insurance cover, free lounge zones in airports and others. 

But, this credit facility is the most expensive one for a firm. Thus, in accordance with bankchart.ca research the percentage rates on business credit cards can amount to 19,99% annually. At the same time, a lot of such cards have interest free days. This grace period can vary from 21 to 25 days. So, your company can save on interest expenses if it zeroes the card liabilities monthly till the due date. 

The liable manager should know that additional fees as servicing commissions or foreign exchange tariffs can be charged. You must not forget to pay a minimum monthly repayment in order not to be fined by the bank. Unfortunately, business credit cards can be restricted for some operations like making some types of purchases or cash withdrawals. 

If a company summarizes, the advantages and confines of business credit cards are: 

  • pros: 
  1. Cash flow management
  2. Immediate access to credit limit or own funds
  3. Expenses control
  4. Interest free days often are provided
  5. Supplementary cards can be issued
  6. Security of funds
  7. Choice of a firm – the card issuer
  8. Simplification of accounting
  9. Discounts on goods and services from partners and other privileges
  10. Additional useful software for the company
  11. Improvement of the credit score
  • cons: 
  1. Great commissions and banks rates
  2. A good credit score is required
  3. Restrictions on the card operations can be established
  4. Business costs transactions only
  5. Stimulate overspending of funds

Step two. What credit cards suit your business? 

The range of business credit cards in Canada is not as wide as for individuals, but nevertheless you can get several proposals from the banks with different features depending on your company’s needs, like: 

Low rate business credit cards 

If you expect that your company will not be able to redeem all the card debts till the maturity date each month, then this type of cards suits your business best. Thus, according to our research the interest rates on them are the lowest on the market and range from 4,6% to 10,45% yearly. At the same time you must repay at least a minimum monthly payment. Low rate business credit cards, as a rule, don’t provide any rewards, and suit for entrepreneurs, new businesses and small firms. 

No fee credit cards 

As the previous ones, low fee business credit cards will help you to optimize your company cash flow and fit for firms which do not want to spend a lot on bank commissions. The banks do not charge any annual servicing commissions on these cards, but the interest rates are higher and in accordance with our investigation they range from 4,6% to 19,99% annually. So, you should redeem the liabilities constantly during the grace period in order not to overpay. Like low rate cards these ones, as a rule, do not have any privileges and bonuses. 

Business credit cards for VIP persons 

VIP credit cards can be issued for your executive staff and enable them with additional services, as free gift cards, chargeless lounge zones in airports, discounts on restaurants, hotels and air tickets, cash back,  24/7 concierge service, priority servicing at branches, etc. They have a premium class, like Visa and MC Gold, Visa and MC Platinum, Visa Signature, Visa Black or MC World Elite. On the other hand, Canadian banks usually charge the highest tariffs on such cards - the annual servicing commission can reach 120 CAD. 

Travel and rewards business credit cards 

If your firm often purchases commodities at companies which are partners of your bank, rewards credit cards with accumulative points - discounts and other bonuses may suit you best. Travel cards may take place if your staff flies a lot (for example, with Alaska, British or American airlines) for business negotiations or attends to conferences or other business events. 

But, these cards are rather expensive - the annual servicing fee according to our research can reach 180 CAD. On the other side, some operations for these credit cards, for example, foreign exchange can be cheaper or even free. 

Cash back business credit cards worth highlighting, the reimbursement percentage can reach 3%. But the maximum rate usually is provided not for all costs but for the expenses, made at particular companies or even directions, for example, petrol purchases. 

Secured credit cards 

This type of business credit cards fit for businesses with a poor credit score for which obtaining other types of cards is not an easy task. Secured credit cards require a pledge and therefore it is readily to get them. As a rule, secured cards haven’t any one-time commissions, seldom yearly fees occur. 

Credit cards issuers 

According to the criterion of the card issuers, business credit cards can be divided into cards of: 

  • American Express
  • MasterCard
  • Visa 

Do not worry about which the issuer to choose, but consider the card parameters proposed by the banks. Because all the issuers guarantee cardholders with security, worldwide access, privileges from partners and other bonuses. 

The following questions will help you to choose the type and the credit card, which fits your business best: 

  1. What is the expected turnover on the business credit cards?
  2. What tariff does the bank charge on its business credit cards? Are any advantageous promotional conditions proposed?
  3. Are there any interest free days provided?
  4. What is the sum of the card credit limit?
  5. What classes of cards are required by your staff? Does the director need a VIP one?
  6. Are supplementary cards needed? How many?
  7. Has the business credit card any discounts or accumulative points programs? Does your firm use these commodities of the bank’s partners?
  8. What sum of insurance does the card cover?
  9. Does the bank provide any additional privileges and perks like concierge service, free lounge zones in airports, free software useful for business and others?
  10. Does your or the bank software support credit card accounting? 

If you are going to get additional business credit cards, you should issue them only for the personnel you trust. But, at the same time you should check all their card transactions on a regular basis with special software, for example, the Internet banking or your accounting program.

Step three. Comparison of business credit cards

In order to choose the card which fits your company best, the liable manager should consider all price and non-price features of the proposed business credit cards. The most important of such a price parameter is the percentage rate, which can be divided to:

  • Purchases interest rate – as a rule, is the smallest type of constant bank rates and is used if the card operation was performed with Internet or a POS terminal
  • Cash advance rate – in Canada vary from 4,6% to 19,99% annually and is charged if the staff withdraw loan funds from ATMs or at branches
  • When a cardholder transfers credit funds from the issued business credit card to the previous one to redeem the liabilities, a balance transfer percentage rate appears
  • Advertising interest rate – is set on a temporal basis to entice clients from other banks

Also Canadian banks charge a lot of commissions on business credit cards, which you should consider in order not to overpay and to select the best offer: 

  • periodic fees – as a rule, are charged annually and according to our investigation vary from 0 to 180 CAD
  • ATMs withdrawal commission takes place when your personnel withdraw money from a cash machine or at branches. Some  banks don’t provide this feature for their business credit cards at all
  • over limit commission - if  your staff exceeds the loan limit, an additional fee will be charged. This situation can occur, for example, if you used the credit to the limit, and didn’t leave funds for the servicing fee
  • missed payment commission – if the responsible manager do not make a monthly payment of the minimum required sum, the bank charges a fine, which can reach 35 CAD 
  • foreign exchange fee – can occur if the card owner make transactions in other from his card currency
  • tariffs for supplementary cards – usually till 9 additional cards can be issued. Banks can establish promotional reduced commissions for new clients, but after a particular period standard fees will be charged

Also business owners should think over many other non-price conditions of the proposed business credit cards to select the one, which fits your purposes best: 

  • Credit limit – is the maximum loan facility a cardholder can have on his card without a fine. The bank may increase it if you pay off the liabilities regularly on time
  • Minimum periodic payment – usually is the monthly minimum payment a cardholder needs to make in order to have a good credit history and to eschew penalties
  • Grace period – is a period of time when a bank does not charge percentage rates if the card owner repays its card debts
  • Privileges and bonuses – a bank can offer its cardholders additional bonuses, for example, travel insurance cover, cumulative program and discounts on commodities from partners, cash back, concierge service and others
  • Additional software – as a rule, 24/7 access to Internet banking with surveys of your card transactions is provided by each bank. Also additional useful software is offered, like accounting programs, budget calculation and cash flow control and others
  • Promotional conditions – advertising offers for new clients can be proposed in the form of decreased rates and servicing commissions. But, as a rule, the term of such proposals doesn’t exceed 1 year

Step four. How to get a business credit card? 

Applying for a business credit card your personnel and the firm are to match such requirements:

  • for employees: 
  1. revenues – annual gains of the cardholder should fit the requirements of your bank
  2. citizenship – the cardholders must be residents of Canada
  3. age – your staff must be at least 18 years old
  4. credit history – the employees are to have a high credit score
  • for employers:
  1. experience activities - the firm should have worked at least 1 year and have profitable results
  2. current account – the company is to have an account at the bank
  3. registration – your business must be registered as a legal entity or an entrepreneur
  4. opened court cases – the company is to have no legal judgments of unfulfilled debts

After applying for the bank manager will ask you to provide the following documents and information about your staff and the company:

  1. contacts of your company and the wished cardholders
  2. data disclosure about the owners of business, beneficiaries, executive staff and control authorities
  3. constitutive documents of the company and identification ones of the responsible employees
  4. tax returns and the documents with financial information of your company, like the levels of incomes, assets, liabilities and funds, cash flow, etc.
  5. others

If you want to quick up the process and your bank supports the following possibilities – you may fill online application and attach the electronic copies of the above documents to the form. As a rule, banks quickly consider applications and if the solution is affirmative the staff will be able to use the business credit cards after 5-10 working days.

Getting a business credit card with a good credit rating will be simpler. Besides, with a positive credit history your business is likely to obtain financing with lower interest rates and cimmissions. So, you should check the state of your affairs at one of the largest credit score agencies in Canada regularly and make steps to improve your indicator if it is bad.

If your credit score is poor or your company is a startup, you may apply for a secured credit card. This type of cards requires a partial or complete pledge depending on the bank policy and your firm’s financial state. Also in such a case you may apply for a business credit card with a small limit.

Step five. Features of using a business credit card 

If you finally got business credit cards - do not relax, because their use is even more responsible than filing an application. In particular, it is important to monitor the card expenses, because even the transactions of the employees with great experience in the company must be checked. Such a control can be made with your bookkeeping program or other software.

If your manager lost his card, he must immediately phone the bank and block it. Below are the phones of the largest players in Canada, which should be called in such situations: 

  • Bank Of Montreal - 1-844-837-9228
  • Canadian Imperial Bank Of Commerce - 1-800-465-2422
  • Canadian Western Bank – 1-855-341-4643
  • First Nations Bank Of Canada - 1-888-454-3622
  • Royal Bank Of Canada - 1-800-769-2511
  • Scotiabank - 1-800-472-6842
  • Toronto-Dominion Bank - 1-800-983-8472

Findings

Business credit cards are a perfect manner to divide expenses of your firm from the private ones. They also give your staff an opportunity to make purchases on behalf of the company and to use loan funds within the credit limit in a comfortable way. 

At the same time, do not abuse the credit capacity, because the rates on business credit cards are very high and can amount to 19,99% or even be greater. Do your best to repay regularly the card debts during the interest free days. Choose the kind of business credit card which suits your needs most. Carefully review all credit card conditions before applying for and evaluate whether additional rewards getting is worth an increase in its servicing charges. Open the cards only for the personnel you trust and monitor meticulously their cards operations.


Banking reviews to your e-mail!



Other guides