Your small business is likely going to have to spend money to make money. Business owners who use business rewards credit cards to pay for purchases can earn rewards like cash back, award travel points and miles, gift cards and other redemption options. The rewards you earn can add up quickly and provide significant value. Here’s how to choose and use business rewards credit cards to your advantage.
Pros and Cons of Business Rewards Credit Cards
While business rewards cards can benefit most small businesses, there are pros and cons you need to consider:
Pros:
- Business credit cards can be good for improving cash flow. They offer short-term financing and are often startup friendly.
- Perks can add up, depending on the rewards you choose.
- Putting expenses on a business credit card can make bookkeeping easier and help ensure you don’t forget to deduct eligible expenses.
- Credit cards offer superior fraud protection when compared to other payment methods.
- Business credit cards often help build business credit.
- Small-business cards allow you to extend your purchasing power to employee users.
- Small business cards can offer benefits such as extended warranty protection and travel insurance.
Cons:
- Business credit cards aren’t covered by the same regulations as personal credit cards, so it’s important to pay close attention to payment due dates and terms.
- Most business credit card issuers will check the owner’s personal credit report and require good to excellent personal credit to qualify. A personal guarantee is commonly required.
Best Business Rewards Credit Cards
: Best for Big Spenders Who Travel
often holds a spot in “best business credit card” lists, and with good reason. The card typically boasts a strong welcome offer, industry leading rewards earning potential, and a bevy of travel perks, including airline credits.
With a annual fee, this card is really designed for businesses with significant expenditures, especially when it comes to travel. However, when all perks, rewards, and statement credits are factored in, it certainly remains a top contender.
: Most Flexible Rewards Program
The has a lot to offer, and with a much lower annual fee.
With the you have a simplified but potentially lucrative points system. These categories are revolving and will change monthly based on your spending patterns. Points, therefore, are earned retroactively. This is really a boon to business owners who won’t benefit from a single earning category, especially if spending needs change from month to month.
Though cardholders will need to pay a annual fee. Foreign transaction fees — .
: High Rewards Plus Expense Management Tools
The is best known for top notch expense management tools but it also offers rewards: Pay faster to earn the highest level of rewards. With the , you can eliminate expense reports, build your business credit, and never go over budget again.
: Solid Rewards for Amazon Purchases
If your business will be regularly shopping on Amazon, AWS or Whole Foods check out the .
Eligible purchases offer the choice of extra time to pay when cash flow is tight, or a high cash back rate when you pay quickly.
: Best Hotel Rewards Credit Card
As with most co-branded hotel cards, the allows you to earn the most points on eligible purchases at participating Marriott Bonvoy properties.
There is a annual fee. However, if you’re a Marriot, SPG, or Ritz-Carlton loyalist, then this card really makes up for it in both rewards and travel perks.
: Excellent Rewards for Delta Flyers
Delta frequent fliers should seriously consider a Delta co-branded credit card, which offers cardmembers the opportunity to earn points toward flights, priority boarding, free checked bags and more. While there are several options to choose from, if it’s a generous welcome offer you’re looking for, the is an excellent choice.
Types of Small Business Credit Card Rewards
Broadly, rewards fall into three categories:
- Cash back
- Travel perks
- Purchase rewards
There are many types of business credit card rewards, but they are usually cash back or travel rewards. Cash back is simple enough, but travel rewards can take the form of airline miles, hotel points or points/miles in a program run by the credit card issuer. For example, American Express business cards offer Membership Rewards points while Chase Ink business cards offer Ultimate Rewards points. These points can be redeemed for travel reservations, cash back, gift cards or merchandise. Or you can transfer these rewards to airline miles or hotel points with their travel partners. And when you’re able to redeem these airline miles or hotel points for expensive reservations, you can often realize even more value than you could from other options.
How to Choose a Business Rewards Credit Card
The key to choosing the best business credit card for your business will be choosing the card that complements the way you do business and offers the types of benefits you will most likely be able to use. Questions to ask yourself when choosing a rewards card:
- How much do you anticipate spending on your card? This may determine whether you want to look for a card with no limit on rewards you can earn.
- Do you spend heavily in one or two categories (gas or office supply stores for example)? If so, it may make sense to get a card with higher rewards for spending in bonus categories.
- Is there a sign up bonus or welcome offer?
- If there is an intro APR or reduced annual fee the first year? What is the cost after that?
- Can you earn more rewards with employee cards? If so, will you be charged an annual fee for each employee card?
- Does your business involve a lot of travel by car or truck? If so, a business gas card may help you save on fuel purchases.
Cash Back Rewards
Cash back rewards are consistently popular because every business owner can use more cash! Read the terms carefully. Some cards will offer a specific cash back reward rate for all spending, while others will offer higher cash back rates in specific spending categories.
Others may combine a fixed reward rate with a bonus at the end of the first year.
Travel Rewards
Travel rewards are appealing for those who do a lot of business travel or just want to do more traveling in general. In addition to miles or points that can be used for airfare or hotel rooms, there are many other perks that make these cards popular.
Questions to ask yourself when choosing a travel rewards card:
- Am I loyal to a particular airline or hotel brand?
- Can I earn bonus miles? Is there a strong welcome offer?
- What is the annual fee and will the benefits make it worth it?
If you prefer to fly a specific airline or or stay in a particular brand of hotel (Hilton, Marriott, etc.), consider getting a co-branded card. (A co-branded card will carry the logo of that brand but will also carry an American Express, MasterCard or Visa logo.) This will allow you to earn perks with the provider you use most, and you will earn points both from travel and from card purchases.
In addition to points or miles, airline reward cards may offer priority boarding, free checked bags, and airport lounge access on premium cards. Hotel reward cards may offer elite status and upgrades in addition to points toward free rooms.
If you are a bargain shopper, though, then a general travel reward card will be more appealing as you can earn rewards that can be redeemed for travel through various travel providers. These cards may also offer airport lounge access or coverage for rental cars in addition to other rewards.
How to Apply for a Business Rewards Credit Card
- Know your credit. Your personal credit history and credit scores are a main determining factor behind which cards you will qualify for. Lenders may check personal credit reports and/or credit scores with Equifax, Experian and/or Transunion so it’s a good idea to check all three if you’re shopping for a credit card.
- Know your annual income. You’ll be asked for your personal income on your business credit card application. This means any source of income, not just income you’re making from your business.
- Narrow down your options. Nav’s best business credit cards list can help you narrow down your choices based on what’s most important to you.
- Review costs. Business credit cards offer comparable APRs to that of personal credit cards, but APRs do vary by card and are influenced by your credit scores and income. If you are applying for a business charge card, make sure you understand the fees.
- Know the eligibility requirements for the card you select. Card issuers don’t reveal all their criteria, but tools like Nav can help you choose cards based on your qualifications.
- Apply for the business credit card. You may be asked for your Social Security Number (SSN) as well as your Taxpayer Identification number (TIN) or Employer Identification Number (EIN) for your business if you have one. If you apply online, you’ll usually get a decision right away.
What Does it Take to Qualify for a Business Rewards Credit Card?
Compared to a small business loan, it’s generally relatively easy to apply for a small business credit card. If you have good to excellent personal credit, most credit card providers will welcome your business. If you have fair credit, there may still be options though they will be more limited. The basic requirements include:
- A business of some kind (including independent contractors, gig workers and sole proprietors).
- A business name and address. You can operate your business out of your home and use a home address if you choose.
- Good or excellent credit. The better your personal credit score the better the rewards cards that will be available to you. You should expect to have a personal credit score of 640 on the low end and 720 or above for top-tier business credit cards. High credit scores can also help you earn high credit limits.
How to Get the Most Out of Your Business Rewards Credit Card
Maximizing rewards means taking a careful look at all the available cards and selecting the one best suited for your specific needs. It may make sense to have more than one business credit card. One could offer cash back and be used for general purchases, for example, while the other could be a travel rewards card used primarily for travel purchases. Or you get a card to use just for purchases you need more time to pay off. (A card with a low introductory APR could be a good option. Most credit cards carry a variable APR that is based at least in part on your credit history.)
Use your card for business spending whenever possible to earn rewards. Keep track of rewards rates that are higher for certain spending categories so you know which card to use when.
Try to use your personal card for personal expenses and vice versa. Co-mingling business and personal spending on the same card is not a good business practice. Savvy business owners may even use a personal credit card and business credit card from the same credit card issuer in order to maximize travel rewards earned.
Finally, review the credit cards you carry each year to make sure you are still using the best card for your business needs. (That’s also a good time to review welcome bonuses if you’re considering getting a new card. You may be able to get a significant number of bonus points or cash back when you sign up and spend a certain amount within the first few months of account opening.)
Are Business Credit Card Rewards Taxable?
Earning rewards can certainly save you money but are you responsible for paying taxes once you’ve redeemed them. Generally, the rules governing rewards earned through a business credit card are similar to those earned through personal credit cards.
For the most part, the use of miles, points, and cash back is considered as a discount and not taxable income. Therefore, there is no specific tax liability associated with most of the basic rewards programs available.
However, there are some considerations that should be made when it comes to dedications. Typically, if you’re using rewards to cover all or a portion of a purchase, you should avoid writing it off as a business expense.
That said, there is one instance in which your rewards may become taxable. If you didn’t have to do anything to receive the reward, e.g., spend $3,000 in sixty days, then taxes may apply.
The best bet? Be diligent when it comes to recording your expenses and rewards redemptions, and when tax time comes, speak to your accountant so that they can offer the best advice for your specific situation.
Can You Redeem Business Credit Card Rewards for Personal Use?
Yes, the rewards you earn from your business credit card are yours to do whatever you want with. While some financial experts say that it’s better to keep your business and personal expenses separate, there’s no rule that says you can’t retain your rewards for your own personal use. For example, many small business owners will use the travel rewards earned from their business credit cards to treat themselves and their families to a vacation. However, others will use these rewards for business travel or for employee incentives.
Tips for applying for business cards
There’s a lot of uncertainty about how to apply for a business credit card. When you apply for a business credit card, you can use your company’s Employer Identification Number (EIN), if you have one. But if your business hasn’t been incorporated, or hasn’t applied for an EIN, you can just use your Social Security Number (SSN) instead. So you can apply as an unincorporated sole-proprietor using your name as your business name, you don’t need an LLC.
