How to Choose the Right Credit Card for Your Business

How to Choose the Right Credit Card for Your Business

Social Studies | Posted by - August 14, 2014 at 12:30 am

The right credit card can be helpful for your business, particularly when you’re just starting out. According to a recent report by the Canadian Federation for Independent Business, 44 per cent of respondents, most of whom were small or new business owners, said they relied on credit cards for everyday purchasing.

But before you start charging, make sure you’ve selected the best card for your business needs. We asked Henrietta Ross, CEO of the non-profit Canadian Association of Credit Counselling Services, for her advice for entrepreneurs on how to choose a credit card wisely.

Assess Your Most Pressing Business Needs
There are myriad business credit cards available on the market, and many come with perks such as travel rewards, cash back and product discounts. To make an informed decision about what works best for your business, consider what you would be using the card for. “You’ll want to look at the range of services the various credit cards provide for business and do a cost-benefit analysis to determine if the benefits of a card would outweigh the rate you’d have to pay for it.”

For example, if your business relies on doing a lot of travel or car rentals, look for cards that offer points. For purchasing merchandise, Ross suggests looking into cards with warranty protection or purchasing insurance. And for pure cash flow needs, consider a card that offers cash back or low interest rates.

Shop Around
Start your credit card search by setting up a meeting with a representative at your current bank who can walk you through the ins and outs of all their products. But you’ll also want to meet with representatives at competing banks to weigh all your options. Do your own research, too, by reading online reviews and card comparisons done by independent publications with no ties to a specific bank. For example, this roundup of the best credit cards in Canada evaluates cards in several categories, including business. 

Consider the Credit Limit
If you intend to put several major purchases on your card, make sure the limit is high enough for your needs. “The last thing a new business would want to do is get a card with too low of a limit and find yourself in an over limit situation,” Ross warns. “That won’t be good for the credibility of your business moving forward.” Analyze your spending needs and make sure you’re choosing a card that offers you enough flexibility to cover your expenses.

Think Carefully about the Interest Rate
If you’re just starting out, a card’s interest rate may be your most significant deciding factor. “Often for a new business, cash is tight and often you’ll see a new business needing to carry a balance more than an established business,” Ross says. If this sounds like you, the interest rate cost of a card could far outweigh the benefits of any reward program. Determine whether you will need to carry a balance and if so, choose a low rate card until you know you can afford to pay your bill in full each month.

Selecting the right card and making timely payments can help you establish financial credibility and work in your favour as your business and financial needs grow.

“A credit card can be a very valuable tool for an entrepreneur,” says Ross, “but know yourself and your needs first before making your choice.”

Tags: credit card, small business, scotiabank, finances, business, public speaking

Jennifer Goldberg
Jennifer Goldberg is a freelance writer and editor based in Toronto. She's an avid magazine reader, art lover and co-founder of Tavanberg, a multiplatform content agency in Toronto. She has edited or written for Best Health, Flare, the Globe and Mail, and more. Check out her work at Twitter: @jennmg
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