Small Business Owner’s Guide to Credit Card Rewards

When starting a business or secondary activity, a Business Rewards credit card can be a money saving tool.

Consider this: Although credit card companies have revamped their rewards programs to make them more pandemic-friendly, 31% of Americans did not redeem any rewards in 2020.

It’s money that stays on the table, and in business, every dollar counts. Develop a smart strategy for maximize your credit card rewards can help you achieve your entrepreneurial goals.

As a business owner or secondary scammer, your spending habits may be especially suited to earning credit card points, miles, or cash back rewards.

For example, if your business requires you to travel regularly, you are ready to earn miles on flights. Or, if you run an outsourcing business, you could be making money on the building materials and supplies you buy.

Think of it this way: you are already spending money on your business. Why not get some of it back?

Why Small Business Owners Should Use Reward Cards

When you run a business or a side business, every choice you make can affect the bottom line. Getting a rewards card can be a smart business decision for several reasons.

Here’s a look at some of the main benefits of a business credit card.

  • Organization: Having a dedicated business credit card can make it easier to organize spending in one place. You can invoice all business purchases for the month and then make a payment from your business checking account to cover it.
  • Separate personal and business expenses: Mixing personal and business expenses together can lead to headaches when it’s time to file taxes. Charging deductible business expenses to a separate credit card makes it easier to file taxes.
  • Expenditure tracking and budgeting: Maintaining a business budget is just as important as having a personal budget. Using a credit card to bill business expenses makes it easy to keep track of expenses and lets you see where your money is going at a glance. Some business credit cards even come with expense tracking software to help you out.
  • Purchase protection: Purchase protection can give you some peace of mind, especially if you are making large purchases to invest in your business. This card benefit can help cover replacement or repair costs if something you purchase is stolen, lost, or damaged.
  • Awards: Credit card rewards can be a great way to save money for your business. For example, if you win travel rewards, you can use them to book discounted or even free flights. With cash back, you can apply it to your statement balance or make other business purchases.

Another advantage of business rewards cards is that they are not exclusive to certain types of businesses. Virtually all types of businesses can benefit from the use of rewards credit cards. It’s about choosing the right card for your business.

For example, let’s say you run a landscaping business. In that case, choosing a card that reimburses you for gasoline and other purchases could help you get cash back when you refuel vehicles and equipment or stock up on other supplies. Or let’s say you run an online home subscription box business. You could earn rewards with a card that earns you points or cash back on internet services and shipping costs.

How to choose the best rewards credit card for your business

The first thing to know about choosing a rewards credit card for your business is that it isn’t right for everyone. The best card for your business will depend on your spending habits, needs and goals.

When evaluating business credit card options, here are a few things to consider:

  • Reward type: First, think about what kind of rewards would be most valuable to your business, based on how you spend. If you spend most of your travel expenses, for example, miles or points might be better than cash back. The key is to choose a card that offers the type of rewards that you are most likely to use.
  • Launch bonus: A launch bonus can increase the value of a rewards card, at least in the short term. For example, you could earn 50,000 miles or $ 300 in cash back if you spend a certain amount in the first few months after opening the account. But weigh the size of the bonus against what you would have to spend to earn it. If you need to change your usual spending habits to qualify for a bonus, it might not be worth it.
  • Advantages of the card: Along with the rewards, consider what a business credit card can bring to the table. For example, if you take frequent business trips, a card that provides access to the airport lounge or priority boarding can be a game-changer. Purchase benefits such as purchase protection and extended warranty are valuable and common among cash back cards.
  • Interest and fees: If you don’t plan on paying your balance in full each month, you’ll want to check the APR of any business card you’re considering. Also, factor in the card’s annual fee to determine how easily you might be able to claim it back as rewards. Many premium cards with high annual fees offer a lot of valuable benefits, but make sure you actually use them.

Which is better: points, miles or cash back?

In terms of whether cash back, points or miles are better, there is no concrete answer. If your goal is to save real-time money for your business, you might want to choose a cash back card because it’s actually like getting a discount on the items you buy.

On the flip side, if you’re hoping to save money on your travels, you might be better off using a card that offers points or miles. You can accumulate points or miles as you spend, then use them as needed to book travel. A card that offers regular anniversary bonus points or miles can help you earn rewards even faster.

Can you redeem business credit card rewards for personal use?

You may not always want to use your credit card rewards to reinvest in your business. You might want to earn travel miles so you can book a dream vacation.

Since corporate credit card rewards are tax-free, redeeming points or miles for a personal benefit won’t create any tax headaches. However, you should be aware that making money can affect how much you can deduct for business purchases.

And you might face challenges if you run your business with a partner. In this scenario, you need to work out an agreement on how business rewards should be shared to avoid conflicts over points, miles, or cash back.

How to manage rewards earned by employees

Purchases with the employee card are treated the same as purchases associated with the primary cardholder, which means they also earn rewards.

You can also simplify expense tracking and record keeping by charging all purchases to the same account. And many transmitters allow you to add employees at no additional cost.

If you plan to add employees to your work rewards account, consider whether you want to set limits on where the card can be used or on the amount that can be charged.

Depending on the card, you may have built-in features that allow you to assign spending limits to individual employee cards. And if your card doesn’t have this feature, consider creating a written policy for card usage, so your employees understand what is and isn’t allowed.

How to formulate your business rewards strategy

Getting the most out of a Business Rewards credit card starts with having a plan. Here are some concrete steps you can take to determine your rewards strategy.

  • Analyze your business expenses: Before you start comparing rewards cards, take a close look at your business’ typical spending in any given month. Examining bank statements can help you determine where you tend to spend the most money, which can help you target the right rewards card.
  • Weigh the benefits of the bonus categories: SSome Business Rewards cards offer a fixed rate of rewards on all purchases, such as 2% cash back on all purchases. Others offer rewards at multiple levels, maybe 3% on gasoline and 1.5% on everything else. If you want to keep it simple, you can choose a flat rate rewards card, but if you are hoping to spend strategically to earn as many rewards as possible, a card that offers bonus categories may make more sense.
  • Determine what kind of rewards and perks you would like to earn: You will get the best return on your investment by choosing a card that offers rewards tailored to your goals. Do you want to put money back in your pocket or save on your trips? What types of benefits are valuable to you?
  • Consider redemption options: Maximizing rewards doesn’t just mean earning them. You also need to think about how you will use them. Some exchange options offer more value than others. For example, you will usually get more value redeeming points or miles for travel than gift cards.

The bottom line

If you are interested in growing your business or a side business, a business rewards card could be a stepping stone to achieving your goals. And besides earning rewards, they can make your business’s accounting management easier. Most importantly, take the time to find the right card that matches how your business spends and how you plan to use the rewards you’ve earned.


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