How Business Owners Can Use Credit Cards to Turn Company Expenses Into Perks
Aside from offering a straightforward way to increase the size of a company’s proverbial wallet and ability to navigate through times of uneven cash flow, a dedicated business credit card can help entrepreneurs, business owners and freelancers alike rack up lucrative rewards.
The best business credit cards offer the ability to accumulate points or cash back on every dollar spent towards a business – turning routine operational expenses, unexpected business costs and investment purchases into perks.
Earning rewards and picking the right business card
Many business credit cards offer travel points for every dollar you spend on your company. Depending on the card and the rewards program, points can be redeemed for an array of benefits including everything from flight tickets and hotel rooms to rental vehicles, office supplies (such as printers) and even credits that can be used to reduce your monthly statement.
On the other hand, cash-back cards reimburse a percentage of the purchases you make through your card. The cash rewards you earn can be directly invested back into your business.
Whether you choose to apply for a travel rewards card or a cash-back credit card depends largely on the nature of your business. If your company’s operating costs are high or if business trips are a regular necessity, you may want to opt for a rewards card that dishes out points. However, if your priority is to improve your company’s cash flow and travelling to meet with clients or vendors is a rarity, then a cash-back credit card may be the more viable option.
Another important factor to consider when deciding between which business credit card to apply for is whether a card’s bonus categories match your business’ spending profile. If new office supplies or having to cover the cost of gas for employees travelling on the road are routine, you’ll want to apply for a card that offers additional points or cash back for those type of high-spend purchases. You’ll also want to consider what welcome bonuses are available to new cardholders. For example, the BMO CashBack Business Mastercard currently features a lucrative welcome bonus of 6% cash back on office supplies, cell phone and internet bills as well as any purchases at Shell stations for the first four months for business owners who apply prior to October 31, 2018.
Regardless of which type of card you choose, one thing is clear: if you’re an entrepreneur or business owner who doesn’t use a credit card to cover your company’s expenses, you’re needlessly leaving rewards on the table and potentially hurting your bottom line.
All that aside, to ensure your business credit card works to your advantage, make sure you set up a budget and only cover purchases on your card if your business has the wherewithal to pay down statements every month. Otherwise, you’ll get hit with interest charges on any carried over balances.
Using a personal credit card to cover business expenses
While a business credit card is easy to secure for most small businesses, the application process may require an article of incorporation. So, if you’re a freelancer or sole-proprietor, the pool of business credit cards you can apply for might be smaller. Not to mention, if you’re a freelancer or your business is a side-gig, you may not need access to the higher credit limits typically offered by most business credit cards.
In such cases, using a personal credit card to cover business expenses is still a viable option. With that in mind, it’s critical to note that any credit card you use for business expenses shouldn’t also be used to cover your daily personal purchases, like your grocery bills, as it can dramatically complicate your bookkeeping process.
There are numerous personal credit cards in Canada to choose from, with each offering their own unique range of benefits, so it’s critical to compare and identify the cards that match your business’ spending profile. For example, if you’re an interior designer looking to minimize your costs, you could opt for the Tangerine Money-Back Credit Card, as it features no annual fee and offers the ability to earn 2% cash back on furniture and gas-related purchases. If the majority of your suppliers are located south of the border and a bulk of your business expenses are made in US dollars, then you’ll also want to consider a no foreign transaction fee credit card, which can save you upwards of 2.5% on every purchase made in a non-Canadian currency.
The additional perks of having a dedicated business credit card
The benefits of having a dedicated business credit card go beyond simply earning and redeeming points. A number of credit cards offer additional perks including access to airport lounges, emergency medical travel insurance and discounts on car rentals that can be accessed by you and your employees.
Not to mention, by having a credit card that’s devoted to covering business expenses, you can simplify your bookkeeping process and more easily stay on top of your company’s finances without having to waste time separating your business and personal purchases.
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