Earning cash back for your business can be appealing if you’re hoping to save money and preserve cash flow. Compared with a travel rewards card, a business cash rewards credit card could prove valuable when it comes to redemption options, especially if the COVID-19 pandemic is limiting your travel. And if you work remotely or are self-employed, then you may not benefit as much from the rewards and perks a business travel credit card might offer.
How Business Cash Back Credit Cards Work
Business cash back credit cards are similar to personal cash back credit cards – you earn a set percentage of what you spend back.
Having a business cash back card can help you keep business and personal spending separate while earning back some of what you spend, says Jacob Dayan, CEO and founder of Community Tax, a company that offers small-business bookkeeping and account services.
How you earn cash back and in what amount largely depends on the card. Some business cash rewards cards allow you to earn a flat percentage of cash back, regardless of what you buy. Other cards tier rewards, with some types of purchases earning more cash back than others.
Business cash back credit cards can also offer unlimited cash rewards or cap the amount of cash back you can earn. You’re more likely to see a cash back cap on cards that tier rewards and offer higher cash back rewards rates.
How Businesses Can Benefit From Cash Back Cards
There are several advantages to using a cash back card for your business. Compared with a debit card or cash, a credit card offers more payment flexibility. With rewards, you can get paid back for some of what you spend.
Earning cash back with a business credit card can be useful if you’re focused on saving money for your business. Depending on the card, you may be able to redeem cash back for:
- Statement credit
- Deposit into a business bank account
- Gift cards
- Travel and unique experiences
- Charitable donations
- Merchandise and shopping
If you’re choosing between a business cash back and business travel card, consider your needs.
“Cash back cards have the advantage of offering straightforward benefits without the complexity of redemption rules and processes which other rewards cards, like travel cards, have,” says Ralph Dangelmaier, CEO of card payments processor BlueSnap. “And, of course, cash has the most flexibility of use.”
A travel rewards card can be great – but it’s only as good as what it can be used for. If your travel activity is curbed, as it likely has been due to the coronavirus pandemic, you may have fewer opportunities to earn or redeem travel rewards. With a cash back rewards card, you can continue earning rewards on everyday business spending.
How to Choose a Business Cash Back Card
If you’re interested in getting a cash back rewards card for your business, take time to compare card options. When reviewing cards, take into account:
- Rewards structure
- Card fees, including annual fees and foreign transaction fees
- Regular interest rate for purchases and balance transfers
- Introductory interest rate for purchases and balance transfers, if offered
- Introductory cash back bonus
- Cash back redemption options
- Security and expense management controls
- Other card benefits and perks
The rewards structure should match up with how your business typically spends money. So if you normally spend the biggest chunk of your business budget on office supplies, for example, you’d want to choose a card that is most rewarding in that purchase category.
Cash rewards should be weighed against the card’s annual percentage rate, Dangelmaier says, if there’s a possibility that you may carry a balance.
Beyond ongoing rewards, consider whether the card offers an introductory cash back bonus and what terms you must meet to qualify. Typically, this means spending a certain amount within the first three months of account opening. If you can meet the minimum requirement, that’s a simple way to earn more cash back on top of your regular rewards.
Keep in mind that the more perks a card offers, the more likely you are to pay an annual fee. Paying an annual fee in itself isn’t bad, but it should be justified by the value of the rewards and perks you’re enjoying. For example, paying a $500 annual fee wouldn’t make sense if you’re only earning $300 in cash back each year and not taking advantage of money-saving benefits like cardholder discounts or travel credits.
Get the Most Out of Business Cash Back Cards
If you decide your business needs a cash back rewards card, consider these tips for making the most of it.
- Pay in full. Charging larger purchases to a business cash back rewards card could be an easy way to qualify for an introductory bonus. But plan to pay it off in full or look for a card that also offers an introductory 0% APR on purchases to avoid paying interest charges. Carrying a balance with interest month to month can cancel out the value of any cash back you’re earning.
- Match cards to spending. If you opt to use multiple cash back business cards, make sure the rewards are a good fit. “Look at your spending habits and decide which type of cash rewards are better for your pockets,” Dayan says.
- Take advantage of card perks. If your business card offers any money-saving extras, like shopping, dining and travel offers with extra cash back, use them.
- Set employee spending controls. While employee cards can help you pile up more cash back, be sure to monitor account activity to verify how the card is being used.