When it comes to finding the right credit card to help fund your business, it’s important to think about which expenses you plan to charge to the card, how much you think you’ll spend on average each month and how you’ll afford your credit card bill when it comes due. It’s also key to understand your interest rate, especially if you end up carrying a balance on your card from month to month, so that you aren’t surprised when you see your credit card statement.
If you’re looking to get the best deal on a business credit card, you might compare different interest rate options. A low-interest business credit card is one type of card that may give you some flexibility. Keep reading to learn more about what to think about before getting a business credit card.
What is APR?
When you sign up for a credit card, your interest rate will likely be shown as an annual percentage rate (APR). The APR on your card is the total cost of borrowing money every year, including interest and potentially some fees, such as an annual fee. Several factors can impact the APR you are offered, including your credit score and income. If your APR is variable, as it is for most credit cards, it will also be influenced by the prime rate. The prime rate is a benchmark interest rate set by the Bank of Canada and can fluctuate based on market conditions.
If you always pay your credit card in full by the due date, you likely won’t need to pay interest. But if you only pay the minimum or only make a partial payment, you’ll still have a balance on the card that carries over to the next month. That’s when interest kicks in. If you have a card with a high APR, carrying a balance could quickly become very costly.
What are your interest rate options?
Depending on what you’re looking for, you might consider a few different types of interest rates for your business credit card.
A standard credit card rate
Most credit cards in Canada have an APR around 20%.[1] With a standard-rate business credit card, you won’t get the same savings on interest that you might from a low-rate or 0% intro APR card, but you may earn more in travel rewards like points, miles, cash back or statement credits. If those perks work better for your business and you don’t plan on carrying a big balance on your card, this could be a good option for you.
A low interest rate
If you’re just getting your business off the ground, a low-interest business credit card could save you a substantial amount of money while you build business credit. A few percentage points less on your APR could make a real difference in how much money you have to spend on day-to-day business expenses and your long-term goals.
If you’re curious about low-interest credit cards, CIBC is well-versed in helping Canadian small businesses find the right low-interest credit solution. They also provide ways to track your spending, manage your money and budget for the days and weeks ahead through their online CreditSmart® tool.
A promotional low or 0% introductory rate
With this type of credit card, you may be offered a low promotional or 0% introductory interest rate for a specific number of months. This means you’ll be able to make very low-interest or interest-free purchases for a period of time.
Low and 0% introductory APR business credit cards are rare in Canada, but there are a few options. If you plan to make a significant purchase for your business, such as upgrading your computer equipment, finding a 0% intro APR card could save you a lot of money if you’re able to pay off your balance before the offer period expires. Otherwise, you could wind up owing a lot of interest once you transition to a standard APR.
Find the interest rate that works best for you
Understanding APR and different interest rate options is important for the financial well-being of your business. Choosing the right card could potentially save you money along the way, especially if you carry a balance.
Research a variety of options, think about how you manage your money and consider which type of card features are the most important for your business to thrive and grow.
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