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Credit card firms take aim at entrepreneurs’ wallets Add to ...

Even when he flies economy, Roger McMillan manages to sneak a little bit of downtime in one of the airline lounges generally reserved for first- or business-class travellers.

To gain entry into these lounges, Mr. McMillan simply flashes his American Express Business Platinum card, a charge card for entrepreneurs that comes with a package of benefits and rewards, including access to more than 600 lounges around the world.

“I travel a lot for business and access to lounges is very important to me,” says Mr. McMillan, who is president and chief executive officer of McMillan Financial, a Toronto-based insurance agency and financial consulting firm. “And the points – earning points for my purchases is also important.”

Credit and charge cards have long been a preferred financing tool for entrepreneurs such as Mr. McMillan. It’s hard to find publicly available statistics on credit card use by small businesses in Canada, but in the United States a 2010 study by the Federal Reserve – the country’s central bank – reported that 83 per cent of entrepreneurs used credit cards to pay for goods and services. Of them, nearly two-thirds used small-business credit cards.

Relatively new compared with their personal counterparts, business credit cards started taking off in earnest in the late 1990s. Today Canadian entrepreneurs have dozens to choose from. And unlike company cards of years past that were typically lighter on benefits and rewards than personal credit cards, many of today’s corporate cards come with increasingly generous perks and points.

“Credit card companies are really making a big push into the small business space,” says Patrick Sojka, CEO and founder of Rewards Canada, a website owned by Calgary-based FFB Group, which provides consumer information on reward programs. “American Express, for example, has a dedicated team now devoted to small-business card holders that they started not too long ago.”

With so many business credit cards competing for slots in their wallets, choosing the right card and reward program can be a daunting task for busy entrepreneurs. And once they make their choice, what can they do to take full advantage of all the benefits attached to their plastic?

Most credit card providers have a function that allows for side-by-side comparisons of their products. There are also sites, such as RewardsCanada.ca and RedFlagDeals.com, that aggregate information on credit cards from various issuers. Before they hit the Apply button online, entrepreneurs should carefully review a prospective credit card’s list of perks and rewards and check off the ones that are really useful to their business, Mr. Sojka says.

“For example, are you and your employees renting cars regularly? If yes, then auto rental collision coverage would probably be a useful benefit to have,” he says. “And if you’re interested in a card because it gives you points, figure out how much you’d need to spend to gain a certain level of points and if those points are actually worth the annual fee on the card.”

One credit card issuer, TD Canada Trust, makes crunching these numbers easier by providing online calculators that add up points based on monthly spending, and applying a dollar value to the total points.

Some rewards don’t necessarily have a dollar value but can be extremely valuable to small business owners, says Mr. Sojka. American Express, for instance, offers express access through security at Toronto’s main airport with its Business Platinum card.

“We hear from some of our customers ‘I’m travelling a lot for my business and I’m hard-pressed for time,” says Athena Varmazis, vice-president and general manager for small business services at American Express Canada. “They’re looking for benefits that can give them back time.”

Flexibility in how they use their points is also important to entrepreneurs, says Ms. Varmazis. Points toward airfare and hotel may be great for a small business where staff have to make numerous trips to set up a supply chain in its first years of operations, but those points won’t be as valuable to the business when travel becomes less frequent.

To give cardholders more ways to spend their points, Amex runs a membership rewards website where members can shop for a variety of items, from electronics and gift cards to plane tickets and cruises, Ms. Varmazis says.

Other card issuers, including all the major banks, offer a similar service to their business cardholders through online stores where they can they redeem points or miles for travel rewards, merchandise or gift cards.

Mr. Sojka says this makes it easier for small businesses to use the rewards as gifts to clients, or as employee bonuses.

“You can give your clients and employees gift cards, or you can reward your best employees with a trip,” he says.

It’s a good idea to go with a business card whose rewards can be co-ordinated with those from a personal credit card, says Nick Mastromarco, managing director for acquisition, loyalty and partnerships at the Bank of Montreal. BMO’s MasterCard reward offerings for business, for instance, are based on Air Miles, making it easy for entrepreneurs to link all rewards from business and personal purchases to one Air Miles account.

“That means rewards earned on their business cards can be used for personal redemptions,” Mr. Mastromarco says.

While some small businesses may balk at paying an annual fee for their credit card, Mr. Mastromarco notes that these fees, as well as those charged for additional employee cards, are tax deductible as long as the card is used solely for business purchases. He suggests consulting with a tax consultant or financial adviser to find out exactly what can and cannot be claimed as a tax deduction.

With all these rewards and benefits, it’s not surprising that more entrepreneurs today are passing over their personal credit cards in favour of their business credit or charge card, Mr. Sojka says.

He expects credit card rewards programs for small business to get even better in the future.

“Credit card companies are making their sign-up offers more attractive,” he says. “We’re seeing richer rewards on the cards and I think we’re going to be seeing more of that.”

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