Maximize Credit Card Rewards with a Small Business Card
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...
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: a small business card with a rewards program.
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, Capital One® Spark® Miles Select for Business will reward you with a one-time sign-up bonus of 20,000 miles once you spend $3,000 on purchases within 3 months. Earn 1.5 miles per $1 on every purchase, including those you make during the intro period.
If you are looking for a business card to help with travel expenses, the Bank of America® Business Advantage Travel Rewards World Mastercard® credit card offers more points for certain travel purchases:
- 3X - Earn 3 points per $1 spent on travel purchases (car, hotel, airline) booked through the Bank of America® Travel Center
- 1.5X - Earn 1.5 points per $1 spent on all purchases
Be aware that most rewards cards have interest rates that would easily negate any cash back you might earn, so make sure that you can typically pay your monthly balance in full before signing up. On the plus side, many business credit cards have no annual fee!
Besides getting rewards of statement credit, cash back, or gift cards, small business cards have two distinct advantages: they help you keep your business and personal expenses separate, and allow you to establish a solid credit history for the business itself.
Using separate cards for personal and business expenses can help simplify your record keeping, 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 small business 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’s 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.
Check out our top small business credit cards.