How to Choose a Small Business Credit Card for Cash Back Rewards

A pile of money and credit cards

Small business owners need to do everything possible to save money, and a cash back credit card can be a powerful tool in this struggle. By using a cash back credit card for your frequent business purchases, it can be possible to earn as much as 5% cash back. But the key to earning the most possible cash back from our small business credit cards is choosing the right card or card combination.


Small Business Credit Card Basics

A small business credit card is very similar to a personal credit card, but there are some key differences. They are similar in that they both rely on the primary account holder’s personal credit and a guarantee of repayment. And while small business credit cards are exempt from many of the consumer protection provisions of the CARD Act of 2009, most major card issuers have chosen to voluntarily have their cards comply with the laws that pertain to personal credit cards.

However, small business credit cards that offer cash back rewards are more likely to offer bonuses for purchases that companies make more often than consumers. For example, a small business card may offer bonuses for office supplies, online advertising, and telecommunications purchases, rather than for groceries and entertainment charges. Small business credit cards are also likely to include powerful reporting and expense tracking tools that can simplify your accounting and tax preparation.

To be approved for a small business credit card, you merely have to have some type of commercial venture. It can be an unincorporated sole-proprietorship, an LLC or any other type of corporation. And if you don’t have an Employer Identification Number (EIN), you can just use your Social Security Number (SSN) instead.

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Recommended: For more information on how to get a small business credit card, check out our guide.

Small Business Credit Cards That Earn Cash Back

While there are many small business credit cards that offer travel rewards, a lot of small business owners prefer the simplicity, flexibility, and value of cash back. You can divide the market for cash back small business credit cards into two categories; those that offer a flat rate of cash back on all purchases, and those that offer bonus cash back on purchases from featured merchant categories.

The advantage of flat-rate cash back cards is that you can expect a high rate of return on all purchases, usually between 1.5% and 2%. With credit cards that offer bonus rewards for certain purchases, you’ll see up to 5% cash back when your purchases qualify for a bonus, but just 1% cash back on all other purchases.

Strategies for Earning the Most Rewards

If you can find a small business credit card that offers you a high enough bonus on your most frequent purchases, then you might be able to justify it over a flat-rate card that offers a high rate of cash back on all purchases. However, you should be aware that many cards that offer a bonus for certain purchases have limits on the dollar value of purchases that qualify for the bonus each year. After you’ve reached the maximum allowable bonus, then you’ll only earn the standard, non-bonus rate which is typically 1%.

The strategy that will allow you to earn the most possible cash back rewards for your small business purchases is to have at least two credit cards. You can have one or more cards that offer you the largest bonuses for the kinds of purchases that your business makes most, and another card that you use for all other non-bonus purchases.

Other Factors to Consider When Choosing a Small Business Cash Back Card

Beyond the rate of cash back, there are other factors that you’ll want to consider before choosing a small business credit card. For example, you should consider the card’s initial sign-up bonus if you’re looking to maximize the cash back you receive. A typical cash back small business credit card will offer at least $100 in cash back, and some have been known to offer as much as $500.

Another factor is the fees charged. Most cash back small business reward credit cards won’t have an annual fee, but some of the ones with the highest rates of cash back will. To choose the right one, compare the amount of cash back that you earn with a no-fee card versus one with a fee, and factor in the cost of the fee.

Another fee to consider is the foreign transaction fee. These are fees imposed on all transactions processed outside of the United States. This includes purchases you make when traveling as well as transactions you might make at home with foreign companies, where the charges are processed overseas. Many credit cards still impose an unnecessary 3% foreign transaction fee, which will negate the value of any rewards you earn. Thankfully, there are a growing number of cards that no longer have this fee, including many cash back small business credit cards.

You might also wish to consider the card’s standard interest rate and any 0% APR promotional financing offered. That said, cash back small business reward credit cards are best used by companies that will avoid interest by paying their balances in full every month. Credit cards typically have higher interest rates than other forms of small business financing, and the rates offered cash back small business credit cards will be higher than similar cards that don’t offer rewards. If you need to carry a balance on your credit cards then you should consider a card with the lowest possible standard interest rate, which won’t be a rewards credit card.

However, you might appreciate a card that has an introductory financing offer for new purchases, balance transfers or both. With cash back small business credit cards, these offers can be as little as six months or as long as 15. And while you don’t want to carry a balance beyond the expiration of a promotional financing offer, you could enjoy a free loan to help your business get started. Or in the case of balance transfers, you could stop incurring interest charges on an existing balance, although you’ll likely pay a balance transfer fee of 3% of the amount transferred.

Bottom Line

Credit cards that offer small business owners a chance to earn cash back on their purchases can be a great deal, but you have to find the right one. The process starts with choosing a card that offers a flat rate of cash back on all purchases, one that offers bonus categories, or better yet, a combination of the two. It’s also important to look beyond cash back and consider sign-up bonuses, fees, and other benefits. By taking the time to create a strategy for earning cash back from your credit cards, your small business can save even more money than you might have thought possible.

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Recommended: Not sure which card you should pick? Check out our recommendations on the Top 5 Business Credit Cards.

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