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Introduction
Business owners know how challenging managing a business can be. A business card can help make it easier. Simply put, a business credit card is a card that is assigned to a business and used specifically for business expenses. It is similar to a personal credit card, in that it provides the cardholder with a revolving credit but helps separate business expenses from personal spending. A business card can also help build a business’s credit rating and track expenses. This guide will explain how business credit cards work, key benefits, how to apply, and which card might be best for you.
Key Takeaways
- Business cards help keep company expenses separate from personal spending.
- New businesses, sole proprietors, and freelancers can apply for a business card.
- There are a range of business cards available for different business sizes and needs.
- The key benefits include expense tracking, higher limits, and the ability to add employee cards.
- Other benefits include providing additional financial flexibility, building your business’s credit history, and simplifying your tax records.
What is a business credit card?
Let’s start with the basics. A business credit card is designed and intended to be used specifically for business-related purchases and offers the user the ability to make purchase on credit. It functions in the same way as a personal credit card, with the key differences being that a business card is issued to the business, may report to commercial (not personal) credit bureaus, and is used for business-related purchases.
What are the benefits of a business credit card?
From saving time to streamlining spending, business credit cards offer several benefits to business owners. They can allow you to manage your business expenses more effectively with robust reporting and control features, save you time, and earn valuable rewards and benefits. That’s not all. Using a business credit card will also allow you to:
Separate personal and business expenses.
Let’s face it—you already have enough to do. Combining personal and business expenses on one card can result in extra paperwork, complicate tax filing, and make tracking expenses difficult. With a separate card for business, all your business expenses are easy to access, file and track, so you can focus on more important issues.
Simplify bookkeeping.
With a business credit card, you’ll never have to spend time separating your business and personal expenses line by line. Keeping business expenses separate can simplify bookkeeping.
Manage cash flow with the grace period.
You already know how important cash flow is. Many business credit cards come with an extended interest-free grace period, making it easier for you to manage cash flow without having to use your capital.
Build business credit.
Most businesses rely on a strong credit rating in order to grow. As long as you’re consistently making payments on time and at or above the minimum payment, your business credit card can raise your business’s credit rating and improve your credit profile. This could allow you to get better rate and repayment terms on future loans and lines of credit.
Access reporting and expense tracking tools.
Many business credit cards offer online tools that help you with expense tracking. Accurate tracking of business expenses can provide you with insights and understanding of your budget and cash flow.
Issue employee cards with spend controls.
Allowing your employees to make specific purchases for the business means you can spend your time on more important issues. Spending controls can be put in place to manage expenses, and it’s easy to see what has been purchased.
Earn rewards and special perks.
Many cards allow you to get cash back or redeem points that you can use for business purposes, such as gift cards, restaurant meals, or office supplies. You can also earn travel perks, such as access to an airline’s VIP lounge at airports or discounts on hotels.
To sum it up: A business credit card can help you manage your business more effectively and efficiently. It can save you time, simplify bookkeeping, build your business’s credit rating and provide insights on business spending while earning you rewards and special perks.
How do business credit cards work?
The short answer is that a business credit card works in much the same way as a personal credit card, except that it is used specifically for business expenses. Your card will come with a credit limit, which is the maximum amount you can spend. Within that limit you can use the card to pay for any business-related expenses such as office supplies, software, shipping, equipment, and travel. You’ll receive a monthly statement, with a minimum payment requirement, and a payment due date. The minimum payment must be paid by the specified due date.
The card will come with an interest-free grace period, after which you will be charged interest on any amounts outstanding. The good news is that business cards typically have longer interest-free grace periods, which makes managing cash flow easier.
Like personal credit cards, business cards use a system of revolving credit. That simply means that you can spend any amount up to your credit limit, and once the amount you spent has been paid off your credit limit will return to the original limit.
Categories of business credit cards
Before you can determine which card is right for you, you should understand the different categories of business credit cards. One offers travel or points rewards, another offers low (or zero) annual fees, and cash back. These cards are designed for small to medium sized business owners. Another category is corporate or commercial cards designed for large businesses with complex needs. These cards offer the ability to manage expenses with spending controls for employee cards as well as access to enhanced financial reporting.
Business credit card vs. personal credit card
What is the difference between a business and personal credit card? While business credit cards’ functionality is similar to personal credit cards, there are several key differences that make them more suitable for business owners:
| Feature | Business credit card | Personal credit card |
|---|---|---|
| Credit limits | Higher limits for higher volume, ongoing business expenses | Lower limits |
| Rewards structure | Can be geared towards business, such as earning points for office supplies | Exclusively for personal use |
| Interest-free grace period | Typically longer, up to 55 days | Shorter, usually no more than 21 days |
| Number of authorized users | Business cards up to 10 users, commercial cards up to 100+ | Limited, usually no more than five or ten users |
| Credit bureau reporting | Business cards report to personal, commercial cards to business | Personal credit reporting |
Business credit card vs. corporate/commercial credit card
Business credit cards are designed for small and medium sized businesses with ten or fewer employees and annual sales revenue under $3 million. They help:
- Separate company and business expenses
- Build credit history
- Manage cash flow with up to 55 interest-free days payable
- Track expenses and payments
Business credit cards are designed for sole proprietors and growing businesses, and qualification is evaluated based on personal credit record and income.
Corporate or commercial credit cards are for larger companies with more employees and annual sales revenue over $3 million. They offer:
- Better visibility and control of company expenses
- Powerful card management and reporting tools
- Manage cash flow with up to 55 days interest-free days payable
- Integration with expenses management systems
In order to qualify for a commercial card, a business must have an established credit history.
In summary: There are a wide variety of business credit cards designed for every type of business and business owner. Choosing the right card for your business depends on your sales revenue, your business needs and goals, and the size of your business.
Do I need a business credit card?
No, a business is not required to have a business credit card, at least from a legal perspective. However, a business credit card can be beneficial to every business, large or small. Using a business credit card for ongoing business expenses, such as computers, travel, entertainment, online services, and cell phones, can simplify bookkeeping, save time, and earn rewards.
Who can apply for a business credit card?
Any business can apply for a business credit card. That includes:
- Sole proprietors
- Partnerships
- Corporations
- Startups
- Freelancers/consultants
- Incorporated companies
- Independent contractors
If you’re wondering, “can a new business get a credit card?” the answer is yes. It’s common for financial institutions to accept applications from new businesses. You don’t need established revenue to qualify. New business credit card applications will be evaluated based on the owner’s (or guarantor’s) personal income and credit score ratings.
Eligibility: What do you need to apply for a business credit card?
Applying for a business card is simple and straightforward. Any business can apply for a credit card, even if the business is new and there is $0 in revenue as of yet. In order to apply, you’ll need to meet the following criteria:
- Age of majority (18+)
- Canadian residency
- No recent bankruptcy
You will also be required to provide certain documentation, including business registration/incorporation papers, a business license, or a sole-proprietorship declaration.
Applications for small businesses, including those with $0 revenue, will be considered and evaluated based on personal income and credit score considerations. Most business credit cards require a “good” personal credit score. If you aren’t able to provide that, there may be options you can consider, such as applying with a guarantor or instead choosing a secured business credit card.
How to choose the right business credit card.
There are many business credit cards you can choose from: but how to choose a business credit card that’s right for you? Ultimately, it comes down to your business needs and goals. You can use the checklist below to help you find the one that best suits you:
| You are: | Consider a card with: | Benefits: |
|---|---|---|
| Planning on purchasing more equipment, materials, technology | A high credit limit |
Extended grace period helps cash flow
More rewards, such as points, cash back or travel rewards on all business purchases |
| Focused on reducing expenses |
Lower rates and annual fees
Cash back or points rewards |
Manage costs while building your credit rating |
| A frequent traveller | Travel benefits and insurance |
Elevated travel experiences
Valuable insurance coverage |
| Interested in improving business performance | Reporting tools |
Track spending and business performance
Manage expenses |
| Managing employees with business credit cards | Card controls |
Set spending limits
Control types of transactions permitted Track individual spending |
How to apply for a business credit card in 3 steps
Completing and submitting an application for a business credit card is a simple process.
Step 1. Determine which credit card is right for you. If you’re not certain which card best suits your needs, you can use RBC's "Help Me Choose" tool to help you make the decision. You can also call us at 1-800-769-2520 or visit your local branch, and we’d be happy to help.
Step 2. Once you’ve selected your card, check your eligibility and gather all the required documents as outlined on the card specifications.
Step 3. You can apply online, by phone, or with an RBC Advisor.
When is the best time to apply for a business credit card?
To optimize your chances of success, the best time to apply for a business credit card is when your personal and business credit is healthy and in good standing. This will maximize your chances for approval and provide you with the resources you need to grow your business and manage your cash flow.
It’s also a good idea to apply when you’re planning on expanding your business or anticipating large expenses. Having your business credit card before these expenses occur will allow you to optimize your benefits and rewards.
If you’re not quite ready to apply for a card, due to issues related to personal or business credit, it’s best to try and avoid “hard inquiries,” or direct inquiries to the credit bureau. Read the eligibility requirements carefully. If you’re not confident you qualify, wait until you meet the requirements before you apply.
In summary: Any business can apply for a business credit card, including those with $0 revenue. Applying for a card is a straightforward process, and eligibility will depend on your personal credit rating. Consider your business size, needs, credit history, spending and rewards when choosing the best card for you.
How to build business credit with your card
Building business credit with your card is straightforward. The most important thing to remember is to make payments on time every month, and, if possible, pay the full amount owing. If you can’t pay the full amount, be sure to make at least the minimum payment.
It’s also a good idea to keep your card utilization low: in other words, try to minimize the amount of available credit that you’re using. Credit-scoring models can view high utilization as an indication than you’re relying heavily on credit.
Consistently making payments on your card will strengthen your business’s credit profile, making future loans, lines of credit, or commercial mortgages easier to access.
Tax considerations for business credit cards
Are business credit card points taxable?
It’s possible. Rewards earned on business spending may have tax implications, depending on how they’re used or redeemed. You should check with CRA guidance manuals or consult a tax professional to see if your taxes are impacted.
Is business credit card interest tax deductible?
Yes, the interest on legitimate business expenses is generally tax deductible as a business expense. Again, you should check with CRA guidance manuals or a tax professional to ensure you qualify for these deductions.
Are all business expenses paid with a business credit card tax deductible?
As a general rule of thumb, as long as the purchases are for ordinary and necessary business expenses, and are properly documented and separate from personal expenses, they are likely tax deductible. Additionally, the card’s annual fee can be claimed as a business expense. To be certain on what is and what is not tax deductible, check with CRA guidance manuals or a tax professional.
Many business credit cards offer reporting and integration features to make preparing and filing your business taxes easier, faster, and more accurate.
Compare RBC business credit cards
Still wondering which card is right for you? This chart should help. Here is an overview of the types of RBC business credit cards available. You can also use RBC's "Help Me Choose" and RBC’s Rewards Calculator tools to help determine which card is best for you.
| Business cards | Best for those who want: | Fees and Rates | Reward highlights | Key benefits |
|---|---|---|---|---|
| WestJet RBC® World Elite Mastercard for Business‡ |
To earn more WestJet points on business expenses
Fly frequently and are interested in additional airline perks Combine personal and business card points |
Annual Fee - $175
Additional Card - $75 (max. of 9 additional cards) Purchase rate – 19.99% Cash advance rate – 22.99% |
Earn up to 6 WestJet points for every $1 spent on WestJet flights1.
Earn 3 WestJet points for every $1 spent on WestJet Vacations and Sunwing Vacations1. Earn 3 WestJet points for every $1 spent on telecommunications, shipping and electronics purchases2. Earn 1.5 WestJet points for every $1 spent on qualifying purchases1. |
WestJet points business expenses and WestJet travel
Ability to combine points earned with personal WestJet cards Access the benefits of Silver Status5 |
| Avion Visa Infinite Business |
To earn Avion points at accelerated rate with redemption flexibility
Insurance benefits Track expenses |
Annual Fee - $175
Additional Card - $75 (max. of 9 additional cards) Purchase rate – 19.99% Cash advance rate – 22.99% |
Earn 1.25 Avion points for every $1 spent in net purchases with your card, on up to $75,000 per year3. |
Earn Avion points
Enjoy a suite of premium insurance coverages3 Access to card management and reporting tools |
| RBC Avion Visa Business |
To earn Avion points
Combine earned points with employee’s credit cards and personal credit card |
Annual Fee - $120
Additional Card - $50 Purchase rate – 19.99% Cash advance rate – 22.99% |
Earn 1 Avion point for every $1 spent in net purchases3. |
Earn Avion points
Combine points earned with employee’s cards on one account5 Pool points between business and personal cards5 |
| Business Cash Back Mastercard |
Want to avoid paying annual fees
Earn cash back, rather than points Manage expenses |
Annual Fee - $0
Additional Card - $0 Purchase rate – 19.99% Cash advance rate – 22.99% |
Earn 2% cash back on purchases within the first 3 months5 and 1% cash back thereafter6 |
Cash back
No annual fee Helps manage cash flow |
| Visa Business Card |
A low-cost way to make everyday purchases
Build their credit history |
Annual Fee - $12
Additional Card - $12 Purchase rate – 19.99% Cash advance rate – 22.99% |
Convenient and affordable way to make business purchases |
Low annual fee
Build credit Improve cash flow |
| Visa CreditLine for Small Business |
A low-cost way to earn Avion points
To manage expenses |
Annual Fee - $0
Additional Card - $0 Purchase rate – From Prime + 2.9% to 11.9%7 Cash advance rate – From Prime + 2.9% to 11.9%7 |
Earn 1 Avion point for every $2 spent in net purchases1. |
No annual fee
Low interest rate Unsecured line of credit with the convenience of a credit card |
| Commercial Cards | ||||
| Commercial Avion Visa |
To earn Avion points
To access card management and tracking tools Access to business insurances |
Annual Fee - $120
Purchase rate – 19.99% Cash advance rate – 22.99% |
1 Avion point for every $1 spent in net purchases2.
Access to RBC NextLogic, our card management and tracking tool Extensive insurances for your company cardholders and employees4 |
Earn Avion points
Track business expenses Valuable insurance coverage |
| Commercial Cash Back Visa | To reduce expenses |
Annual Fee - $60
Purchase rate – 19.99% Cash advance rate – 22.99% |
Earn 0.5% Cash Back on eligible purchases5 |
Low annual fee
Offset business expenses |
| Commercial U.S. Dollar Visa |
To simplify U.S. expenses
Avoid costs of foreign exchange when dealing in USD. Powerful card management and reporting tools |
Annual Fee - $60 USD
Purchase rate – 19.99% Cash advance rate – 22.99% |
Low annual fee |
Pay for and settle U.S. transactions in U.S. funds
Avoid foreign currency exchange charges |
| Commercial Visa | A low annual fee option |
Annual Fee - $30
Purchase rate – 19.99% Cash advance rate – 22.99% |
Low annual fee | Convenient way to make purchases, track expenses, manage spending |
Bottom line: Invest in your business’s future with confidence
It’s not just the convenience. A business credit card can provide a host of benefits that will help you build your business, save you time, and manage your expenses. You’ll be able to increase your business’s credit rating, save time with tracking and monitoring business expenses, all while earning rewards along the way.
Business Credit Card FAQs
Can I use my personal credit card for business purchases?
You can, but that doesn’t mean you necessarily should. While you can use a personal credit card for business expenses, it's best to keep business and personal finances separate to simplify accounting and protect your personal credit.
Utilizing a business card for all business purchases allows you to easily track your expenses, while making it easier to manage the business and file taxes. It can also help protect your personal credit if the business is audited.
Maintaining a clear separation between personal and business spending is easy to do. You can use employee credit cards, categories and spending controls, to help streamline this separation while maintaining control over expenses.
Can I use my business credit card for personal purchases?
Legally and technically, yes. However, it isn’t recommended to mix the expenses because you lose the benefits of simplifying your business tracking. Plus, using a business card for personal purchases could violate some credit card terms and conditions. It could have a negative impact on your personal and business credit scores, as well as making bookkeeping and tax filing more complicated.
Does applying for a business credit card show up as a hard inquiry on my personal credit report?
It can. An application for a business credit, particularly for a small business where you’re providing a personal guarantee, may appear as a hard inquiry on your personal credit report.
Does my business credit card affect my personal credit?
As long as it’s used responsibly, there is generally no impact on your personal credit score based on the typical use of a business card. In other words, if minimum payments (or more) are regularly made on time, your personal credit will not be affected. However, late payments or serious delinquency on a business credit card may be reported and could affect your personal, or your guarantor’s credit.
What are the disadvantages of a business credit card?
If you’re not using the business card regularly, it’s possible the cost of the annual fee will outweigh the rewards you receive. However, there are no-fee cards available that may be more appropriate for your needs. Another possible disadvantage is that many small business cards require a personal guarantee. If you don’t make regular payments, your personal credit may be impacted. However, for any business that is making regular payments, the advantages of a business credit card far outweigh any possible negatives.
Can a new business get a credit card?
Yes, a new business can get a credit card, including sole proprietors and freelancers. You don’t need to have an established business or revenue to qualify for a business credit card. As long as your personal credit is in good standing, you should be able to get a business credit card.
How to get a business credit card?
Getting a business credit card is a simple and straightforward process, whether you’re a start-up, sole proprietor, freelancer, or a small, medium or large business. Just follow these 3 easy steps:
Step 1: Register the business and gather all the relevant documentation required, including business registration/incorporation papers or a business license. You may also need a statement confirming personal income, plus contact and housing details. Your personal credit score (or your guarantor’s credit score, if applicable) must be in good standing.
Step 2: Compare entry-level or secured business card options, and determine which one is best for you.
Step 3: Complete and submit your application.
At RBC, applying for your business credit card only takes a few minutes. Once you’ve determined which card is right for you, (if you’re still not certain, you can use the RBC's "Help Me Choose" tool) you can apply online, in-branch, on the phone, or through the RBC Mobile app.
Is it possible to get a business credit card with limited or poor personal credit?
Possibly. Typically, banks would reject an applicant with limited or poor personal credit. However, there may be other alternatives such as applying to non-traditional financial institutions or getting a personal guarantor with a good credit score.
What credit score is needed for a business credit card?
There is no single established minimum credit score that will qualify you for a business credit card. As long as your personal credit history is in good standing, you should be able to qualify. As a general guideline, a score of 680+ should be sufficient.
Can I issue multiple employee cards on one business credit card account?
Yes. Each additional card will have a unique number and the employee’s name will be tied to one ‘master’ account. Corporate/commercial credit cards offer spending controls that can be used to help manage expenses and improve security.
What happens if my business can't pay off its credit card balance?
An unpaid credit card balance will likely incur late fees and credit card rate increases, and could be reported to the credit card bureau. This will result in a negative impact on the guarantor’s credit score. In addition, guarantor’s are liable for paying any outstanding balance. These negatives can be partially offset by selecting a card with a lower fee, choosing a card with reward, or a cashback card. It’s also a good idea to manage the numbers of cards issued to employees, so that you can regularly keep track of business spending.
How many business credit cards can a business have at once?
There is legally no limit to the numbers of business credit cards a business can hold. However, some financial institutions may have individual limits. The total numbers of cards your business can hold depends on your revenue, financial health, credit score and other factors.
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