When you start a business or side hustle, a business rewards credit card can be one of the savings tools you can use to reach your entrepreneurial goals, but it’s important to have a smart strategy in place to get the most out of your rewards.
Your spending habits may be especially well-suited for earning credit card points, miles, or cash back. If your job requires you to fly regularly, you’re primed to earn flight miles. Or, if you’re a contractor, you might be able to earn cash back on building supplies and materials that you purchase.
You’re already spending money on your business. Why not recoup some of that money? Let’s see how.
Why small business owners should use rewards cards
Using a dedicated business credit card makes sense for a number of reasons. Keeping business and personal expenses separate is important during tax season, and it also makes it easier to track expenses and manage your budget. Plus, using a business credit card responsibly can help build a credit history for your business.
Not all business credit cards offer rewards, but you should look for cards that do, and here’s why.
- You can increase your revenue. The points, miles and cash back you earn by simply charging regular business expenses to your rewards card are worth real money. Flights funded by points or cash back redemptions can equal hundreds of dollars that you can keep or invest in your business.
- The benefits will be for your business and for you. Beyond the perks, consider how a credit card can help your business. For example, if you travel for business a lot, a card that offers airport lounge access and priority boarding can be a big benefit. Perks like purchase protection and extended warranties can give you peace of mind when making big purchases as an investment in your business.
How to choose the best credit card for your business
The first thing to know when choosing a business rewards card is that these cards aren’t one-size-fits-all. The best card for your business will depend on your spending habits, business needs, and entrepreneurial goals.
When you’re ready to start searching for the right rewards card, follow these steps to get started:
- Check your credit score. You can’t know what type of credit card is right for you without knowing your personal and business credit scores. If you don’t already have a business credit profile, your personal credit score, which many credit card issuers check, can be found in a few different ways. Two common ways are to use free tools offered by certain issuers, such as Capital One’s CreditWise or American Express’s MyCredit Guide, or to obtain it from one of the three credit bureaus. Your business credit score can also be found in a few different ways, including by requesting it through a business credit score agency, such as Dun & Bradstreet.
- What kind of reThe ward you want. Consider what type of rewards would be most valuable to your business. If most of your spending is on travel, the miles or points from a top business travel credit card may be preferable to cash back. If you spend a lot on consumables and just want to minimize those costs, the cash back from a popular business cash back credit card may be a better option.
- See the benefits of each cardIt fits. It’s not just about rewards: Look for rewards that can help your business, like travel insurance, credits, service memberships and purchase protection.
- Compare the interest of each cardFees and charges. Check the annual percentage rate (APR) of any business cards you’re considering, in case you need to carry a balance on the card. Also, factor in fees, such as annual fees and foreign transaction fees, to determine how easily you can make up for them with points. Many premium cards have high annual fees, but they also come with a lot of perks — just make sure you’ll actually use them before you apply.
- Select the welcome card you can get BoNus. Welcome bonuses can make a rewards card more valuable, at least in the short term. For example, you might earn thousands of miles or hundreds of dollars in cash back if you spend a certain amount in the first few months after opening your account. But weigh the amount of the bonus against the amount of spending you’ll need to do to earn it. If you have to change your regular business spending or put your business in debt just to qualify for the bonus, it’s probably not worth it.
Can I use my business credit card benefits for personal use?
You don’t always want to use your credit card rewards to reinvest in your business. Maybe you want to collect travel miles to book your dream vacation.
Business card rewards are tax-free, so using points or miles for personal benefit is legal and won’t cause tax issues — but earning cash back could affect the amount you can deduct on business purchases.
And if you run a business with partners, you might face a challenge: You’ll need to agree on how to divide up business rewards to avoid fights over points, miles, and cash back.
How to manage employee earned rewards
Purchases made with employee cards are treated the same as purchases associated with the primary cardholder, so employees still get benefits. Benefits are typically granted to the main credit card account, not individual employee accounts, but your situation may vary. Having all purchases charged to the same account can also simplify expense tracking and record keeping. Many card issuers allow you to add employees at no extra charge.
If you’re considering adding employees to your business card rewards account, consider whether you want to place restrictions on where they can use the card or how much they can charge. Most business cards have a built-in feature that lets you assign a spending limit to each employee card.
If your card doesn’t offer this feature, create a written policy regarding card use so employees know what is and isn’t allowed. You should also make it clear that credit card perks belong to your company, not to individual employees, to prevent employees from trying to take advantage of the perks.
How to make the most of your business credit card benefits
Getting the most out of your business rewards credit card starts with planning. Here are some specific steps you can take to determine your rewards strategy and maximize your rewards earnings.
- Analyze your business spendingTake a closer look at your typical business expenses for a given month. Reviewing your bank statements can show you where you tend to spend the most money, helping you target the right rewards on a new card. You should also keep your spending patterns in mind when targeting credit card welcome bonuses.
- Consider the benefits of bonus categoriesSome business rewards cards offer a fixed rewards rate, such as 2% cash back on all purchases. Others offer tiered rewards or rewards in rotating categories, such as 3% on office supplies and 1.5% on everything else. To get the most out of your rewards rate, you’ll want to make sure you’re charging the right purchases to your card.
- Consider your reimbursement optionsTo get the most out of your rewards, you need to consider not just how you earn them, but how you use them. Some redemption options are more valuable than others. For example, redeeming points or miles for travel is more valuable than redeeming them for gift cards. You might also be able to transfer rewards to a partner to further maximize the rewards you’ve earned.
- Take advantage of statement credits. Business credit cards may come with additional statement credits from various companies that partner with the card issuer. For example, you might be able to get a monthly statement credit for a bundle of phone and Internet service or an annual credit for supplies from an office supply store. These credits can help you get the most out of your card.
Make the most of some of the lesser known business card perks your card offers, such as a free employee card, accounting software, travel insurance, consumer protection, etc. Finally, don’t miss out on the possibility of a welcome bonus that can earn you extra points, miles, or cash back.
Conclusion
If you’re interested in expanding your business or side hustle, a small business credit card that offers rewards could be the stepping stone to your goal. Not only will you earn rewards, but you’ll also have an easier time managing your business. Most importantly, take the time to find the right card that fits the way you spend your business and how you’ll use the rewards you earn.
