Business credit cards

How it works

A business card combines a payment method with credit or charge-account terms. Revolving cards can carry a balance, while charge products may require full payment under their agreement. Liability and reporting differ across providers.

Where it can fit

Cards may help manage travel, subscriptions, purchasing controls, and short expenses that can be cleared promptly. Match payment deadlines to incoming cash and separate business transactions from personal spending.

Look closely at the trade-offs

Rewards do not offset every interest charge or fee. Review annual fees, foreign-exchange costs, cash-advance terms, employee controls, guarantees, and consequences of carrying a balance. Promotional pricing may end before an investment pays back.

Separate payment convenience from borrowing cost

A business card can simplify purchasing, employee spending and expense records. TD’s Canadian guidance describes business-specific features and the need to compare fees and interest. Those benefits do not tell you whether carrying a balance is economical for a particular project. Compare the agreement’s purchase, cash-advance and promotional terms separately, and confirm who is legally liable.

Source: TD: Business credit card basics

Worked example: rewards can be smaller than carrying cost

Suppose a fictional card earns 1.5% on an eligible $10,000 purchase, producing $150 of rewards. Assume that $10,000 then remains outstanding for three months at a simplified 20% annual interest rate. Straight-line interest would be $500, already $350 more than the reward. Real statements use their own balance and date calculations, so this is an illustration rather than an exact bill or APR calculation.

If the business pays the statement balance under the conditions needed for an interest-free purchase period, the result can be different. That does not mean every transaction has such a period or that cash advances receive the same treatment. Read the issuer’s agreement and include annual fees, foreign-currency charges and any supplier surcharge in the comparison.

Choose controls that match how people spend

Set a purpose and limit for each employee card, define who approves unusual purchases and reconcile receipts promptly. A larger overall limit can be useful, but it should not substitute for an expense policy. Plan how cards are recovered or disabled when an employee leaves, and how recurring subscriptions are reassigned. Confirm the actual controls available from the issuer.

For an investment that takes years to produce cash, compare a structured loan with revolving card debt. A small minimum payment can keep an account current while reducing principal slowly. Prepare a realistic payoff date and test the effect of a higher rate after a promotion expires. Avoid counting the card limit as permanent operating cash that cannot change.

For recurring purchases, build a monthly statement routine: match receipts, allocate spending to the right business, confirm the payment date and check whether the planned cash is available. Review subscriptions and employee limits as part of that routine. A card can create useful records, but it does not classify every expense correctly or guarantee that purchases fit the budget. Keep bookkeeping, spending approval and financing decisions connected rather than letting the available limit drive spending.

• Which balances receive a grace period, and under what conditions?
• What rates and fees apply to purchases, advances and foreign spending?
• Who is liable, and where is repayment activity reported?
• How will the balance be paid off without repeated new borrowing?

Your next-step checklist

• Expected spend and payoff pattern
• Interest and annual fees
• Liability and guarantee terms
• Employee spending controls