Credit Card Rewards Programs

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Savvy small business owners are always looking for ways to earn extra money and stretch their financial resources. Many financial managers have an instinctive aversion to business credit cards due to their high interest rates. However, they may not realize that small businesses can earn lots of extra cash by leveraging credit card loyalty programs. The same strategy that you use to earn rewards on personal cards can be used in your business.

By upping the use of business credit cards business owners can free up cash flow and earn cashback at the same time. In this guide, we’ve outlined a simple strategy that small business owners can use to get extra cash into their bank accounts.

Disclaimer: All of the links to credit cards in this article link directly to the credit card company’s website. Biz2Credit does not receive any compensation from these card issuers for promoting their credit products.

Step 1: Identify the Business Credit Card That Is Right for You

Our Top 3: The Three Best Cashback Credit Cards for Small Business Owners

We’ve identified three best credit cards that business owners can either get started with or take advantage of. We’ll link to the application page and give a brief explainer on its perks and benefits.

We emphasized cards that are accessible to most business owners, earn generous cashback on all or certain purchases, offer great sign-up bonuses, and have redemption options with little to no restrictions.

1. Capital One Spark Cash

  • Sign-up Bonus: After spending at least $4,500 in the first three months of holding the card, you’ll earn a one-time $500 bonus.
  • Cash Back Rate: This card earns an unlimited 2% cash back on all purchases that can be redeemed at any time with no restrictions.
  • Annual Fee: There’s no annual fee in the first year, but after that, you’ll pay $95 every year to use the card. The good news is you can probably get that waived!
  • Other Benefits: Capital One allows you to issue cards for employees for free and you’ll earn all the rewards they make from their purchases.

This is our number one choice for small business owners. Why? There are no limits on the amount of spending that you can earn rewards on! This means that all of your spending on everything from Google ads to hotel stays will earn cashback rewards. Other cards will cap the amount of spending that you can get cashback on, but this card has no such restriction. It also has a low annual fee, a generous sign-up bonus, and a myriad of other great benefits.

2. American Express Blue Business Cash

  • Sign-up Bonus: After meeting the $5,000 spending requirement within the first six months of account opening, you’ll earn a $250 statement credit. After an additional $10,000 of spending within the first year of holding the card, you’ll earn another $250 statement credit.
  • Cash Back Rate: This card earns you 2% cashback on the first $50,000 of eligible purchases. On all purchases above the first $50,000, you’ll earn 1% cashback.
  • Annual Fee: This card has no annual fee.
  • Other Benefits: This card offers an introductory 12-month period of 0% APR for purchases and balance transfers.

This card is another great starting point for small business owners. You’ll earn generous cashback, won’t have to deal with paying an annual fee or getting it waived, and the introductory APR can help you manage other credit card debt that you may have.

3. Chase Ink Business Cash

  • Sign-up Bonus: After spending $3,000 within the first 3 months becoming a cardholder, you’ll earn a one-time $500 cashback bonus.
  • Cash Back Rate: This card earns 5% cashback on the first $25,000 in combined purchases at office supply stores and on internet, cable and phone services in a given year. You’ll also earn 2% cashback on the first $25,000 in combined purchases at gas stations and restaurants in a given year.
  • Annual Fee: This card has no annual fee.
  • Other Benefits: Chase allows you to issue employee cards for free and you’ll earn all of the rewards from their spending! It also offers an 0% intro APR for the first year of holding the card.

This card is another good choice but will require a bit of planning in order to maximize your rewards. This card issues cash rewards based on certain bonus categories instead of universally. By strategically using this card on its bonus categories, you can maximize your cashback.

The Ink Business Unlimited card is a good alternative to the Ink Business Cash. It allows you to earn an unlimited 1.5% cashback on every purchase made for your business, which keeps things simple. The card is otherwise pretty much identical to the Ink Business Cash card in terms of benefits.

Closing Note:

While we focused on cashback cards, there are other rewards cards out there that focus on travel points. For example, the Ink Business Preferred credit card from Chase racks up chase ultimate rewards points that can be redeemed through Chase’s shopping portal. This strategy could also be used to cut costs on travel if you use travel rewards cards.

Step 2: Start Paying for Regular Expenses with Your Credit Cards

Put Your Business Expenses onto Your New Cards

Once you’ve found the card (or cards!) that are right for you, start making as many business purchases on them as possible. Some vendors may not allow you to use credit cards for their services, and that’s okay.

Services like Plastiq allow you to get around these restrictions, but they often charge a fee. The extra rewards that you get for using these services often aren’t worth the fees, but that determination should be made on a case-by-case basis.

Getting started ASAP with spending on your credit cards will also lock-up any available signing bonuses.

Make Sure That You Use the Right Cards for The Right Purchases

Certain cards earn extra bonuses for certain categories of business expenses. For example, the Ink Business Cash card earns extra cashback on the first $25,000 of spending on office supplies and internet, phone, and cable services.

With a bit of extra planning, you can ensure that you maximize your cashback.

Step 3: Rack Up the Rewards and Cash Out When Needed

After you’ve shifted as much of your business expenses as possible to the right rewards cards, it’s time to sit back and wait. Once you have a system in place for spending using your cards and paying off the balances, the rewards will accrue automatically.

As time passes, you may identify opportunities or encounter unexpected costs that you would otherwise pay for through traditional credit products. Now, you can redeem your cashback rewards to cover at least part of the costs associated with these instances.

An Example of How Much You Could Be Earning

Restaurant owners spend a lot of money paying suppliers for what they need to serve food on a daily basis. If you spend $1,000,000 every year on supplies and can earn 2% cashback by paying for those supplies with a business credit card, you will earn $20,000 in cashback rewards. Restaurant owners that are cutting a check to suppliers or paying via direct deposit are leaving a ton of cash on the table.

Something every small business owner considering using the cashback strategy should do is analyze their regular spending habits. Find out which of your business expenses could be paid for using rewards credit cards and tally up the total cost. Then, calculate the amount in rewards that you could be earning by multiplying the total amount of expenses by the cashback rate you expect to earn. You could use a simple flat rate of 1.5-2%, or you could pursue more complex estimations by breaking down the expenses by category and identifying cards that earn extra rewards on those categories. You may be surprised at how much extra cash you could be earning!

Taking Advantage of Credit Card Rewards Programs Does Have Its Risks

We’ve laid out what seems to be a pretty straightforward and complication-free strategy to obtain extra cash for your business. While that’s mostly true, it’s important to consider the risks involved in taking advantage of business credit card rewards programs and the implications of those risks for implementing this strategy.

Risk 1: Mismanagement Can Hurt Your Business Credit Score Significantly

One of the principal benefits of using business credit cards is the build-up of a good credit history for your business. Building up a good credit history boosts your credit score by letting rating agencies know that you are reliable and consistent in paying back lenders (in this case credit card issuers) and can handle multiple streams of credit, which boosts your credit score. This can help you secure other forms of capital down the road when you’re looking for more traditional sources of credit.

However, if you mismanage payment of your credit card balances you can end up significantly hurting your business credit score. There are lots of factors that impact your business credit score. The following are especially pertinent for the cashback strategy:

  • Missed Payments: On-time payments are the most important aspect of your credit profile. Not making minimum payments on your credit card bills can do irreparable harm to your business credit score.
  • High Credit Utilization: If you use too much of your credit limit each month, your credit score will suffer. The general rule of thumb is to keep your credit utilization under 30%. This is why, for this strategy, we recommend getting the highest credit limits possible and getting multiple cards. This will help to keep you under 30% utilization for each of your cards and overall even if you pay for lots of business expenses on your card.

Implications for Implementation: Make sure you make at least the minimum payment on all of your cards every month. Ideally, you’ll pay the entire bill to avoid interest (more on that later). Additionally, make sure you have enough credit available to implement this cashback strategy while keeping your credit utilization under 30%. You can do this by getting multiple cards and applying for credit limit increases.

Risk 2: Running Balances Can Saddle You with Massive Interest Payments

Traditional ways of securing business credit usually come in the form of equity investment, regular business loans, and business lines of credit. The most comparable to how credit cards work would be a business line of credit.

If you’re interested, Biz2Credit has great guides explaining how lines of credit work and how to obtain one for your small business.

In short, a small business line of credit allows a business owner to draw necessary working capital from an established credit source. You only pay interest on what you use, and the money can be used pretty quickly (just like a credit card!). When you don’t pay back what you’ve borrowed on a line of credit, you’ll pay interest on that balance. The interest rates usually range between 5-25%, but in the vast majority of cases, interest rates are below 10%.

In stark contrast, credit cards are notorious for having extremely high interest rates, the lowest of which are usually around 15-20%. Your ability to profit off of rewards programs has the trade-off of the risk of accruing tons of interest.

Implications for Implementation: When executing this strategy, you have to make sure that you or your finance team is very diligent about paying off your credit card bills in full every month. If you don’t, you’ll pay far more in interest than you will gain in cashback or other rewards. Lucky for you, pretty much every credit card company has an easy-to-use and comprehensive app (for both Apple and Android) that you can use to manage payments from your cell phone.

Real Example of An Entrepreneur Profiting from This Strategy

You might be thinking that this is a bit outlandish and risky, and for good reason. Like we discussed above, heavy use of credit cards can go incredibly wrong if you make critical mistakes. High interest rates can balloon your debt balances and cripple your small business’s financial strategy. Given this likely apprehension from most small business managers, you might be interested in hearing a quick success story of this strategy in action.

If you’ve ever listened to Reid Hoffman’s podcast Masters of Scale (and don’t skip through the ads) you may have heard the story of Farmgirl Flowers. This company’s story is a proof-of-concept that credit card rewards can be a viable tool in a small business’s financial toolkit.

Christina Stembel, the CEO of Farmgirl Flowers, had zero credit established when she opened her business. But she spent TONS of money paying suppliers distributors and had the idea that using a simple cash back business credit card from Mastercard could net her a significant amount of in rewards that could be used to cover unforeseen costs or fill revenue gaps during slow periods.

What ended up happening? Prior to the summer of 2018, Stembel had accumulated $115,000 in cashback by putting most of her business costs on the company card and used that to power through the “summer slump” of the flower business. In 2019, she spent over $15 million on shipping and purchasing, which will earn her almost $300,000 in cashback rewards for the year.

Bottom Line: By leveraging the power of cashback cards and being careful not to run balances, she created a whole new (and significant) source of extra cash to draw from when needed.

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