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Home Business Finance The Best Cash Back Business Credit Cards
Many different kinds of reward credit cards are available to small business owners. Some have simple reward systems, such as travel miles earned for every dollar you spend. Others are more nebulous, such as business credit cards with complex point systems that can be difficult to redeem. In these cases, it’s hard not to think the credit card company intentionally made the rewards process confusing so their users are less likely to maximize the value of their points.
The simplest of all credit card reward programs is cash back. When you spend money with these types of cards, you get money back as a statement credit, check, or cash deposit. There’s no convoluted exchange system to worry about—it’s simply cash for cash. This process makes cash back cards an ideal option for those who don’t have a lot of experience with credit cards or simply don’t want to mess around with less accessible rewards.
“Cash back credit cards can help you simplify your finances, earn rewards on spending, and take advantage of extra perks that debit cards don’t offer,” explains credit card expert Holly Johnson. “Since cash back rewards are typically easier to understand than travel rewards, a cash back card is also a good option for a first rewards credit card.”
In addition to convenience and clarity, cash back cards also provide other benefits. For starters, many of them don’t charge an annual fee, which means your rewards won’t be partially offset by an amount you have to pay each year. You can also find card options that offer a signup bonus, providing a nice perk right out of the gate.
Cash back cards come with 2 different reward structures. The most basic option pays you a fixed earning percentage for every purchase. It won’t matter if you’re buying new brooms for your warehouse, installing a new oven in your kitchen, or renting an event space for your holiday party, you will earn back a predetermined percentage. A 1% ratio is standard, while the best cards pay up to 3%.
The other reward structure gives you variable reward percentages based on categories. For example, some cards give you 3% cash back at gas stations and 1% cash back for all other purchases. The most versatile credit cards even allow you to select the category for your higher cash back percentage, tailoring the rewards to your spending habits.
This is where strategy comes into play. You’ll need to examine your business spending and find the best way to maximize a cash back card. If you consistently spend large amounts of money in a category where some cards will offer higher percentages, applying for those cards could yield substantial rewards for your business. If your spending is spread evenly throughout many categories, a generous fixed percentage could be the best way to go.
While the rewards structure is crucial, it’s hardly the only aspect you need to consider. Be sure to give yourself ample time to do your due diligence while choosing a card for your business.
“With dozens of choices, keep several issues in mind,” says a Wall Street Journal guide to picking a business credit card. “First, what are your spending habits? Do you plan to pay charges each month, or pay them off over time? If you are carrying a balance, pay attention to the annual percentage rate. If you carry a balance and have good credit, some card issuers may offer you a low interest rate or even a teaser rate as low as 0% for the first year. Some have fixed rates, which could be attractive when rates are rising.”
As you consider various card options, don’t get enchanted by the marketing copy. As noted by the Wall Street Journal, teaser rates can be exceptional during your first year with a new card. But what happens after that year is important. Buried in the fine print could be the fact that the interest rate will increase dramatically in the second year, making the card a poor choice if you intend to use it long term.
Here are several crucial factors you’ll want to pay attention to:
Many cards shine in 1 or 2 of the areas mentioned above but also have weaknesses that make them a poor fit for small businesses. Make sure you always evaluate your card options holistically so you can get the complete picture of how it would impact your finances.
Based on interest rates, reward structures, ease of use, and other factors, here are 4 cash back business credit cards that are worth considering. They each have unique benefits that may or may not fit with your business finances. The only way to find out for sure is to do your due diligence.
This card comes with an APR of 0% for the first year. After that, your creditworthiness will translate into a variable APR of 14.24–20.24%.
Your financial history does more than determine whether or not you’ll be approved for a cash back business credit card. It also will factor into the APR you receive on your cards. A strong credit score can save you substantial amounts of money in the long run, while lower scores (and a correspondingly higher APR) can impact you negatively if you carry a balance through most billing cycles.
To improve your chances for future approvals and to also improve your odds of qualifying for the most favorable rates, pay close attention to how you’re handling your finances today.
“To demonstrate that you are financially responsible, you need to develop a financial track record in good standing,” says Forbes. “Your payment history is 1 of the largest components of your credit score. To ensure on-time payments, set up autopay for all your accounts so the funds are directly debited each month. FICO scores are weighted more heavily by recent payments so you can ‘override’ a missed payment by developing a pattern of more recent on-time payments. Therefore, if you have a delinquent payment, pay off the balance.”
These day-to-day actions play a key role in your credit score, but they’re not the only things that matter. One of the easiest ways to improve your score is to look for errors on your reports TransUnion, Experian, and Equifax. This proactive approach is crucial because about 1 in 5 Americans have mistakes on their credit reports with the major bureaus. Nobody else is going to check your report for you, so be an advocate for yourself and regularly check in to make sure everything is accurate.
If you encounter incorrect information, be sure to take corrective action. The longer you let mistakes linger, the more they can serve as potential roadblocks as you seek financing options for your small business.
Even when you’re well prepared and have a solid credit score, you’ll probably encounter some rejection as you seek financing such as cash back credit cards. Don’t take it personally. The important thing is that you learn from these experiences and come back stronger the next time. With this constructive approach, you’ll put yourself in the best position to succeed with your applications. And when you succeed with your applications, your business often follows suit.
Grant Olsen is a writer specializing in small business loans, leadership skills, and growth strategies. He is a contributing writer for KSL 5 TV, where his articles have generated more than 6 million page views, and has been featured on FitSmallBusiness.com and ModernHealthcare.com. Grant is also the author of the book "Rhino Trouble." He has a B.A. in English from Brigham Young University.
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