Are you still using your personal credit card to pay for business expenses? If so, do you find it challenging to separate personal and business expenses?
Running a business is difficult enough without bogging yourself down with tasks like separating expenses. Maybe it’s time to ask yourself if you should you still be using your personal credit card for your business.
Here’s why both you and your business can benefit from having a business credit card.
Why use a business credit card?
Like personal credit cards, business cards are a convenient way to pay for purchases. You can also authorize your employees to use the account, issue cards to them, set limits, and monitor and control their spending.
Credit cards are less cumbersome than cheques and cash and they’re accepted worldwide. Plus, you can extend your cash flow by taking advantage of the 21-day grace period before payments are due.
Most importantly, separating your business and personal expenses saves you time and money. You no longer need to identify business charges in your personal credit card statements, so you have more time to focus on your business. And your bookkeeper or accountant spends less time and effort tracking your business expenses and deductions at tax time.
What are personal liability and business liability?
Now that you understand the benefits of having a business credit card, let’s discuss what type of credit card application may best fit your needs.
Many business clients apply for a personal liability credit card because the application is much simpler than for a business liability card. Both options are great for separating personal and business expenses, but which credit card is right for you?
Credit is based on your personal financial information and some business financial information. As with a personal credit card, the debt appears on your personal credit bureau report. It affects your personal total debt service ratio (TDSR) and your ability to personally borrow money.
For example, if your personal TDSR entitles you to a $40,000 credit limit, you would split that amount between
Credit is based on the financial information and credit history of the business itself, and of each business owner. You still provide a personal guarantee and are personally liable for the debt.
The debt you accumulate using this type of credit card is associated with your business entity, which appears on your business credit bureau report and financial statements. The benefit of using this type of credit card is that the debt is not reported on your personal credit bureau and does not affect your personal TDSR.
CIBC business credit card options
Personal liability credit cards
These are ideal for start-up businesses with limited financial history — generally businesses that have been in operation for less than 2 years. Although this card is reported on your personal credit bureau, you still reap the benefit of not having to separate your personal and business expenses. You can add up to 9 cardholders on your account.
Choose from 3 personal liability credit cards:
Business liability credit cards
These are ideal for established businesses that have been in operation for more than 2 years, such as corporations, not-for-profits, and partnerships. Up to 15 cards can be issued per account. You can manage spending limits and assign different account permissions for employees using Visa Spend Clarity for Business (PDF, 690 KB) Opens in a new window..
Choose from 3 business liability credit cards:
How to apply for a CIBC business credit card
Applying for a CIBC business credit card is like applying for any credit card.
Applying for a CIBC Business Plus credit card is like applying for a business loan or line of credit.
Still not sure if you need a business credit card?