A small-business owner’s guide to credit card rewards

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When starting a business or side hustle, a business rewards credit card can be a money-saving tool. 

Consider this: despite credit card companies revamping rewards programs to make them more pandemic-friendly, 31% of Americans didn’t redeem any rewards in 2020.

That’s money left on the table, and in business, every dollar counts. Developing a smart strategy for maximizing your credit card rewards can help you reach your entrepreneurial goals. 

As a business owner or side hustler, your spending habits may be uniquely suited to earning credit card points, miles or cash back. 

For example, if your business requires you to fly regularly, you’re primed for earning miles on flights. Or, if you run a contracting business, you could be earning cash back on the building materials and supplies you buy. 

Think of it this way: You’re already spending money for your business. Why not earn some of it back?

Why small-business owners should use rewards cards

When you’re running a business or side hustle, every choice you make can affect the bottom line. Getting a rewards card can be a smart business decision for several reasons. 

Here’s a closer look at some of the top benefits of having a business credit card.

  • Organization: Having a dedicated business credit card can make it easier to organize spending in one place. You can charge all business purchases for the month, then make one payment from your business checking account to cover it. 
  • Separating personal and business expenses: Mingling personal and business spending can lead to headaches when it’s time to file taxes. Charging deductible business expenses to a separate credit card makes tax filing easier. 
  • Expense tracking and budgeting: Maintaining a business budget is just as important as having a personal budget. Using a credit card to charge business expenses takes the guesswork out of tracking spending, and you can see at a glance where your money is going. Some business credit cards even come with expense tracking software to help.
  • Purchase protection: Purchase protection can provide some peace of mind, especially if you’re making large purchases to invest in your business. This card benefit can help with replacement or repair costs if something you buy is stolen, lost or damaged. 
  • Rewards: Credit card rewards can be a great money-saver for your business. For example, if you’re earning travel rewards, you can use them to book discounted or even free flights. With cash back, you can apply that to your statement balance or make other business purchases. 

Another advantage of business rewards cards is that they’re not exclusive to certain types of businesses. Virtually any kind of business can benefit from using rewards credit cards. It’s all about choosing the right card for your business. 

For example, say you run a landscaping business. In that case, choosing a card that pays you cash back on gas and other purchases could help you earn money back when fueling up vehicles and equipment or stocking up on other supplies. Or say you run an online subscription box business from home. You could earn rewards with a card that pays you points or cash back on internet services and shipping. 

How to pick the best rewards credit card for your business

The first thing to know about choosing a rewards credit card for your business is that they aren’t one-size-fits-all. The best card for your business will depend on your spending habits, needs and goals. 

As you weigh business credit card options, here are some things to consider:

  • Rewards type: First, think about what type of rewards would be most valuable for your business, based on how you spend. If you do most of your spending on travel, for instance, then miles or points might be preferable to cash back. The key is choosing a card that offers the type of rewards you’re most likely to use. 
  • Introductory bonus: An introductory bonus can increase a rewards card’s value, at least in the short term. For example, you might be able to earn 50,000 miles or $300 in cash back if you spend a certain amount within the first few months of opening the account. But weigh the size of the bonus against what you’d have to spend to earn it. If you have to change your regular spending patterns to qualify for a bonus, it may not be worth it. 
  • Card perks: Aside from rewards, consider what else a business credit card may bring to the table. For example, if you’re frequently taking business trips, a card that offers airport lounge access or priority boarding can be a game-changer. Shopping perks like purchase protection and extended warranty are valuable and common among cash back cards. 
  • Interest and fees: If you don’t plan to pay your balance in full each month, you’ll want to check out the APR for any business card you’re considering. Also, factor in the card’s annual fee to determine how easily you could earn it back in rewards. Many premium cards with lofty annual fees come with lots of valuable perks, but be sure that you’ll actually make use of them. 

Which is best—points, miles or cash back?

In terms of whether cash back, points or miles are better, there’s no concrete answer. If your goal is to save your business money in real-time, you might choose a cash back rewards card since that’s effectively like getting a discount on the things you buy. 

On the other hand, if you’re hoping to save money on travel, you might be better off with a card that offers points or miles. You can accumulate points or miles as you spend, then use them as needed to book travel. A card that offers regular anniversary bonuses of points or miles can help you rack up rewards even faster. 

Can you redeem business credit card rewards for personal use?

You might not always want to use your credit card rewards to reinvest in your business. Maybe you want to accumulate some travel miles so you can book a dream vacation.

Since business credit card rewards are not taxable, redeeming points or miles for personal benefit won’t create any tax headaches. However, you should be aware that earning cash back can affect how much you’re able to deduct for business purchases.

And you could run into challenges if you’re running your business with a partner. In that scenario, you’d need to work out an agreement about how business rewards should be shared to avoid conflicts over points, miles or cash back. 

How to manage rewards earned by employees

Employee card purchases are treated the same as purchases associated with the primary cardholder, which means they earn rewards, too.

You can also simplify expense tracking and recordkeeping by having all purchases charged to the same account. And many issuers allow you to add employees for no additional fee. 

If you’re considering adding employees to your business rewards account, consider whether you want to set limits on where the card can be used or how much can be charged. 

Depending on the card, you may have built-in features that let you assign spending limits to individual employee cards. And if your card lacks this feature, consider creating a written policy for card use, so your employees understand what is or isn’t allowed. 

How to formulate your business rewards strategy

Making the most of a business rewards credit card starts with having a plan. Here are some concrete steps you can take to determine your rewards strategy. 

  • Analyze your business spending: Before you start comparing rewards cards, take a close look at your typical business spending in a given month. Reviewing bank statements can help you figure out where you tend to spend the most money, which can help you target the right rewards card. 
  • Weigh the benefits of bonus categories: Some business rewards cards offer a flat rewards rate on all purchases, like 2 percent cash back on all purchases. Others offer tiered rewards, maybe 3 percent on gas and 1.5 percent on everything else. If you want to keep things simple, then you might choose a flat-rate rewards card, but if you’re hoping to strategically spend to earn the most rewards possible, a card that offers bonus categories may make more sense. 
  • Determine what sort of rewards and perks you’d like to earn: You’ll get the best return on your investment by choosing a card that offers rewards that fit your goals. Do you want to put money back in your pocket or save on travel? What kind of perks are valuable to you?
  • Think about redemption options: Maximizing rewards doesn’t just mean earning them. You also have to consider how you’ll use them. Some redemption options offer more value than others. For example, you’ll typically get more value when redeeming points or miles for travel than you would for gift cards. 

The bottom line

If you’re interested in growing your business or side hustle, a business rewards card could be a stepping stone for reaching your goals. And aside from earning rewards, they can make managing the accounting side of your business easier. What’s most important is taking time to find the right card that aligns with how your business spends and how you plan to use the rewards you’ve earned. 

Written by
Rebecca Lake
Personal Finance Writer
Rebecca Lake is a freelance writer and blogger specializing in personal finance. Her interest in finance – specifically credit cards – began when she was struggling to pay off over $30,000 in credit card debt. With a passion for helping others make smart financial decisions, she started writing about finance in 2012 and since then has contributed to a number of highly-visible brands online, including CreditCards.com, U.S. News & World Report, Citi Life + Money, Discover Modern Money blog, Bankrate, SmartAsset, Fox Business Network, Forbes Advisor, Magnify Money and Nerdwallet.