WHAT KIND OF SMALL BUSINESS REWARDS CREDIT CARD SHOULD YOU GET?
Small business owners will always have regular expenses to run their business. Each of these purchases is an opportunity for small business owners to earn credit card rewards that may be worth as much as five percent back.
It’s important to understand the types of rewards, such as cashback and travel, that are available to maximize the potential with every payment and receive benefits that make the most sense for their business.
TYPES OF SMALL BUSINESS REWARDS CREDIT CARDS
Most rewards credit cards offer either cash back or miles and points after each purchase. Earning typically happens as a percent of cash back or a number of miles or points per dollar charged to the card. For example, if you make a $100 purchase on a card that offers 1% cash back, you would earn $1 in rewards.
This system works almost exactly the same as rewards with personal credit cards. If you have held cash-back or travel cards in the past, you will find a very similar experience with small business credit cards. In fact, you may be able to access business accounts and manage rewards with the same online login.
When on the hunt for a new card, you will find rewards available in these broad categories:
You may also come across credit cards issued by stores. These cards don’t have a Visa, Mastercard, American Express, or other logos and can’t be used anywhere else but in the store.
Unless you get favorable purchase terms or needed credit with the issuer, it is best to avoid store cards.
There is no perfectly right or wrong category. It all comes down to your personal preferences and where you use your card most.
CASH BACK REWARDS CARDS
Cash back credit cards are widely popular due to what you get in return for each purchase. Some say that cash is king. When it comes to rewards credit cards, cash back is generally predictable, simple to understand and redeem, and it never loses value.
Among cash rewards cards, you’ll typically find rewards come as either a flat rate on all purchases or as a tiered program offering higher rewards rates on bonus categories. If you spend heavily in one category that offers a bonus, finding a card that gives you more on those purchases can make sense. But if your purchases are spread over a wide range of categories, you could be better off with a flat-rate card.
For example, Capital One offers a card with 2 percent cash back on all purchases. Ink Business Cash from Chase, however, offers a higher 5 percent rate on office supply and internet, cable, and phone service providers (up to $25,000 in annual combined purchases) and 2 percent on gas and restaurant purchases (up to $25,000 in annual combined purchases). It gives you 1 percent everywhere else.
Just comparing these two cards, a business that spends heavily on office supplies, telecom, gas, or restaurant purchases would do better with the Ink Business Cash card. Business owners who make most purchases outside of those categories would likely earn more with the flat 2% back from Capital One.
Of course, these are just two in a long list of great small business credit cards for cash back. When searching, also consider factors like annual fees, interest rates, and reward redemption minimums.
GENERAL TRAVEL REWARDS CARDS
If you live for travel, a cash back card may not cut it. While you can certainly tap into cash back rewards to pay for a flight or hotel, you may be able to do better with a travel rewards card.
A credit card from somewhere like Chase, American Express, Barclays, or Capital One could lead you to plenty of free and discounted flights and hotels. At the same time, you may be able to get a better value per dollar than you can with cash back.
For example, the Chase Ink Business Preferred card offers Ultimate Rewards points as a reward currency for eligible purchases. Like the Ink Business Cash card mentioned above, the “everything else” category gives a flat rate. You get 1 percent from Ink Business Cash and 1 point per dollar with Ink Business Preferred.
So, which one is better?
If you value travel, 1 Ultimate Reward point is worth more than 1 cent. Chase Ultimate Rewards points are worth about 2 cents each. AmEx points get a 1.9 cent valuation as of his February 2019 analysis. Capital One and Barclays points are worth a flat 1 cent each.
You can use general rewards through the card issuer’s portal in most cases. You can book directly on most major airlines, hotels, cruises, or train operators through the Chase, American Express, and other rewards websites. In some cases, you can transfer points to partner airlines and hotels for an even better value per mile or point.
A regular economy flight from LAX to London in June currently starts at $1,144 roundtrip including taxes and fees. Business-class costs $7,080 for the same trip. Booking the same flight with a Saver-level award on United, however, costs 60,000 miles round-trip for an economy ticket or 120,000 miles round-trip for business class. Because you can transfer Chase points at a 1:1 ratio to United, that makes 1 point worth 1.9 cents in coach or 5.9 cents in business class.
Programs from Chase and American Express are considered the leaders in general travel rewards. Both offer a wide range of valuable transfer partners plus a host of choices to redeem directly through the Chase or Amex portals.
BRANDED TRAVEL REWARDS CARDS
In the example above, we looked at flying on United Airlines using Chase Ultimate Rewards points. If you are loyal to United or any other airline or hotel, you might want to consider getting that brand’s small business credit card instead of a general rewards card.
While you can use general travel rewards with most airline and hotel programs, branded cards offer more limited redemption options. However, if one brand is a strong favorite or more convenient than others, you may want to pick up a branded card.
In addition to the mile or point rewards, many branded travel rewards credit cards for small businesses offer additional benefits like free checked bags on flights or room upgrades at hotels. They may also include a premium status and other discounts.
But the options to redeem are far more limited and you may get less value. It depends on your travel preferences and the card and program you choose. Some programs include limitations, blackout dates, and other restrictions on redemptions. But programs like Southwest Rapid Rewards and Wyndham Rewards both make using your points simple and straightforward.
If you don’t have any particular airline or hotel loyalty, you should stay away from these cards. But if there is a travel brand you love or are just stuck with for some reason, getting their branded small business credit card may offer a greater payoff.
PICK THE RIGHT SMALL BUSINESS REWARDS CARD FOR YOUR BUSINESS
For those who sit around dreaming about their next travel adventure, a travel rewards card is definitely the best choice. If travel isn’t your thing, cash back credit cards offer a ton of value that you can use any way you choose.
When you use a check, wire transfer, or cash to make a payment, you don’t get anything back. With a small business rewards credit card, every purchase can effectively pay you. Don’t go shopping for your business without one!
TRUiC has partnered with CardRatings for our coverage of credit card products. TRUiC and CardRatings may receive a commission from card issuers.