The Best Cash Back Business Credit Cards

Dec 8, 2019

The Best Cash Back Business Credit Cards

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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:

  • Reward: Not all cash back cards are created equal. Analyze how the reward percentages work, as well as how you redeem the money you earn from purchases. A streamlined redemption system can be worth its weight in gold.
  • Welcome bonus: In addition to the rewards you’ll earn on an ongoing basis, many cards provide extra perks when you sign up. You’ll qualify for such bonuses by successfully qualifying for the card and then spending a required amount of money within a set period.
  • Annual fee: All this reward talk needs to be tempered with the fact that some cards have an annual fee. This fee isn’t always a problem, as the rewards from some cards are plentiful enough to offset the money you’d be paying each year to use it.
  • International usage: For small business owners who travel abroad, foreign transaction fees can become a real thorn in the side. With fees often hovering in the 2–3% range, they can neutralize whatever cash back you might be earning from the purchase. To avoid this situation, look for cards that won’t charge you for purchases made in foreign countries.
  • APR: When carrying a balance on your card, this metric shows how much you’ll pay in interest. It’s common to find lower APR for purchases and balance transfers for the first year, at which point the rate increases permanently. Make sure to do your homework so you’re not caught off-guard if the rates increase.
  • Minimum payment: You’ll be required to make a payment each billing cycle that includes a balance. Knowing the minimum amount is helpful as you plan your finances. You’ll often have the option of paying a predetermined amount or a percentage of the balance.
  • Employee cards: Some card issuers provide employee cards at no charge while others will tack on a fee. If you want to bolster your purchasing amounts on your card by adding employees, always check to see if it’ll cost you. Also, look at whether the card will make it easy to set spending limits and retrieve transaction histories.

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.

About the Author

Grant Olsen

Grant Olsen

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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