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Maximize Credit Card Rewards with a Small Business Card

Maximize Credit Card Rewards with a Small Business Card

• Posted: May 02, 2015 • Updated: February 26, 2016

If you own one of the 28 million small businesses in America, you may be overlooking an easy way to generate passive income that doesn’t require you to change anything about how you operate:  business credit cards with rewards programs.

You probably already have a credit card that you use for your business purchases, but did you know that just by switching to a rewards card, you could reap thousands of dollars in cash back or gift cards every year?

Just as with personal credit cards with rewards programs, many business cards offer a percentage of your purchases – typically 1-5% – back to you; these cards often have promotional periods with sign-up bonuses to boost your rewards even further.  For example the U.S. Bank Business Edge™ Cash Rewards Card earns you 3% cash back on your cellular, gas and office supplies and 1% on all other purchases. If you are looking for a business card to help with Travel expenses, the Capital One® Spark® Miles Select for Business Capital One® Spark® Miles Select for Business earns you a one-time sign up bonus of 20,000 miles, and gives your 1.5 miles per dollar on every purchase.

Be aware that most rewards cards have interest rates that would easily negate any cash back you might earn, so make sure that you typically pay your monthly balance in full before signing up. On the plus side, most business cards have no annual fee!

Besides getting rewards of statement credit, cash back, or gift cards, business credit cards have two distinct advantages:  they help you keep your business and personal expenses separate, and they allow you to establish a solid credit history for the business itself. 

Using separate cards for personal and business expenses can help simplify your recordkeeping, especially at tax time; it may even save you money, as your accountant will not have to spend time sorting out which purchases belong to which category.  And, as you know, using business funds to pay directly for personal expenses is a no-no, especially if you’re incorporated; a business credit card is one more way to help you keep that distinction clear in your day-to-day spending.

Yes, you will need to use your personal credit history in order to apply for the card initially, but once the account is established it begins building a separate history for your business.  As your business grows, an excellent credit history through the use of your rewards card will likely result in better interest rates as you apply for loans for real estate purchases or larger expenditures.

One caveat:  there is an ongoing debate as to whether or not the IRS considers credit card rewards as taxable income; even the IRS’ position seems to be changing over time.  It may even vary depending on whether you take your rewards as cash back or statement credit versus redeeming your points for gift cards to use as you see fit (i.e. personal or business).  Make sure to check with your accountant or tax preparer to be sure you are aware of the latest policies regarding rewards and taxes.

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