A small business owner’s guide to credit card rewards
Key takeaways
Business credit cards that earn rewards — either points, miles or cash back — can help small business owners boost their bottom line and earn additional helpful benefits.
When choosing the best rewards for your business, consider what your business spends the most on.
You’ll also want to consider the card’s interest rates, fees and additional card perks.
You don’t have to reinvest your rewards into your business. You can use them for your personal benefit, since business credit card rewards aren’t taxable.
When starting a business or even side hustle, a business rewards credit card can be among the money-saving tools to reach your entrepreneurial goals. But it’s important to develop a smart strategy to ensure you’re maximizing your rewards.
Your spending habits may be uniquely suited to earning credit card points, miles or cash back. If your business requires you to fly regularly, you’re primed for earning miles for flights. Or if you run a contracting business, you could be earning cash back on the building materials and supplies you buy.
You’re already spending money on your business. Why not earn some of it back? Let’s take a look at how.
Why small business owners should use rewards cards
Using a dedicated business credit card makes sense for a lot of reasons. Keeping your business and personal expenses separate is key for tax season, and it also makes it easier to track your spending and manage your budget. Plus, using a business credit card responsibly helps to build your business’s credit history.
Not every business credit card earns rewards, but you should look for one that does. Here’s why:
You can boost your bottom line. The points, miles and cash back that you can earn just by charging your regular business expenses to a rewards card are worth real money. A points-funded flight or cash back redemption can translate to hundreds of dollars you get to keep or invest in your business.
You can get perks for your business — and for you. Aside from rewards, consider how else a credit card may help your business. For example, if you take frequent business trips, a card that offers airport lounge access or priority boarding can be a game changer. Perks like purchase protection and extended warranties can provide peace of mind if you’re making large purchases to invest in your business.
How to pick a credit card with the best rewards for your business
The first thing to know about choosing a business rewards card is that these cards aren’t one-size-fits-all. The best card for your business depends on your spending habits, business needs and entrepreneurial goals.
If you’re ready to find the rewards card that fits your criteria, start by following these steps:
Find out your credit score. Without knowing your personal and business credit scores, you won’t know what types of credit cards are within reach for you. You can check your personal credit score, which many credit card issuers look at if you don’t yet have a business credit profile, in multiple ways. Two popular methods are by using free tools provided by certain issuers — like CreditWise from Capital One or MyCredit Guide from American Express — or by getting it from one of the three credit bureaus. You can check your business credit score in multiple ways, too, such as by requesting it through a business credit score agency like Dun & Bradstreet.
Decide what type of rewards you want. Think about which type of rewards could be most valuable for your business. If you do most of your spending on travel, then miles or points from a top business travel credit card might be preferable to cash back. If you spend a lot on supplies and want to simply minimize those costs, then cash back from a popular business cash back credit card might be better.
Look at each card’s benefits. Rewards aren’t the only draw. Look for perks that can benefit your business — like travel insurance and credits, service memberships and purchase protections.
Compare each card’s interest rates and fees. Check out the annual percentage rate (APR) for any business card you’re considering just in case you have to carry a balance on the card. Also, factor in fees like annual fees and foreign transaction fees to determine how easily you could earn it back in rewards. Though many premium cards have lofty annual fees, they also come with lots of perks — but you should be sure you’ll actually use them before applying.
Choose a card with an obtainable welcome bonus. A welcome bonus can increase a rewards card’s value, at least in the short term. For example, you might be able to earn thousands of miles or hundreds of dollars in cash back if you spend a specific amount within the first few months of opening your account. But weigh the size of the bonus against what you’d have to spend to earn it. If you have to change the regular spending of your business or put your business in debt just to qualify for a bonus, it’s likely not worth it.
Can you redeem business credit card rewards for personal use?
You might not always want to use your credit card rewards to reinvest in your business. Maybe you want to accumulate some travel miles so you can book a dream vacation.
Since business card rewards are not taxable, redeeming points or miles for personal benefit is legal and won’t create any tax headaches. However, earning cash back can affect how much you’re able to deduct for business purchases.
And you could run into challenges if you’re running your business with a partner. You’d need to work out an agreement about how business rewards should be shared to avoid conflicts over points, miles or cash back.
How to manage rewards earned by employees
Employee card purchases are treated the same as purchases associated with the primary cardholder, which means they earn rewards, too. Those rewards are typically credited to the main credit card account as opposed to individual employee accounts, but this can vary. You can also simplify expense tracking and record keeping by having all purchases charged to the same account. Many issuers allow you to add employees for no additional fee.
If you’re considering adding employees to your business card rewards account, consider whether you want to set limits on where the card can be used or how much can be charged. Most business cards come with built-in features that let you assign spending limits to individual employee cards.
If your card lacks this feature, you may want to create a written policy for card use, so your employees understand what is and isn’t allowed. You should also make it clear that credit card rewards belong to the company and not individual employees to avoid instances where an employee might try to redeem them.
How to make the most of your business credit card rewards
Making the most of a business rewards credit card starts with having a plan. Here are concrete steps you can take to determine your rewards strategy and maximize your rewards earnings:
Analyze your business spending. Take a close look at your typical business spending in a given month. Reviewing bank statements can help you figure out where you tend to spend the most money, which can help you target the right rewards with your new card. You’ll also want to keep your spending patterns in mind as you aim for your credit card’s welcome bonus.
Weigh the benefits of bonus categories. Some business rewards cards offer a flat rewards rate, like 2 percent cash back on all purchases. Others offer tiered rewards or rewards in rotating categories, like 3 percent on office supplies and 1.5 percent on everything else. You’ll need to make sure you’re charging the right purchases to your card in order to take full advantage of your rewards rates.
Think about redemption options. Maximizing rewards doesn’t just mean earning them — you need to consider how you’ll use them. Some redemption options offer more value than others. For example, you’ll typically get more value when redeeming points or miles for travel than you would for gift cards. And you may be able to transfer rewards to partners to further maximize what you earn.
Take advantage of statement credits. Your business credit card likely comes with additional statement credits from various businesses that have partnered with your card issuer. For example, you might be able to get a monthly statement credit for phone and internet service bundles or a yearly credit for supplies from an office supply store. Using these credits will help you get the most out of your card’s benefits.
Take full advantage of lesser-known business card perks your card may offer, such as free employee cards, accounting software, travel insurance and consumer protections. And finally, don’t miss out on the possibility of a welcome bonus that may score you additional points, miles or cash back.
The bottom line
If you’re interested in growing your business or side hustle, a small business credit card that offers rewards could be a stepping stone for reaching your goals. Aside from earning rewards, they can make managing your business easier. What’s most important is taking time to find the right card that aligns with how your business spends and how you plan to use the rewards you’ve earned.
