3 Business Credit Card Tips for Small Businesses

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3 Business Credit Card Tips for Small Businesses

Let’s take a moment to answer a few questions: How do you cover expenses while you’re waiting for your biggest customer to pay last month’s invoice? Can you book a trip to pitch your most valuable prospect without worrying about the cost? (Or better yet, can you book it using only credit card points?) How are you being rewarded for every dollar your business spends?

Credit cards more than likely play a role in at least one (if not all) of your answers.

Savvy business owners rely on credit cards as essential tools to help make ends meet, handle unexpected expenses, and even fund expansion. In fact, many business owners opt for more than one type of credit card in their financial tool kits. Because of the different types of spending and sophisticated reward programs available, having one card for shipping and another for travel can be a clever way to make your budget go farther.

Today, 65 percent of small businesses use credit cards to pay for office supplies, technology investments, and everything in between. Having the right cards, deploying them in appropriate situations, and optimizing the associated reward programs makes perfect sense when you’re running a business. So what’s holding businesses back from taking full advantage? Navigating the credit card landscape — and all the fine print that comes along with it — can be daunting.

Business Credit Card Tips

The Case for Specialized Credit Cards

When you’re just getting started with credit cards, one of the biggest decisions you’ll make is determining which is the best fit. But first, you’ll have to decide whether you need a business credit card at all.

For most businesses, having accessible credit is a necessity. Credit cards are incredibly convenient and cost-effective when they’re used responsibly. If you don’t have an established credit history, getting a business credit card can be easier than qualifying for a loan or line of credit through your bank. Regular payments — and paying more than the minimum each month — is a good way to create a solid credit history for your company.

More importantly, business owners need to separate their personal and company finances as much as possible. Blurring the lines by not applying for and putting credit cards in the name of the business can have undesirable repercussions on your personal credit rating. Despite this, half of small business credit cards are in the owner’s name alone, according to the U.S. Small Business Administration.

If you don’t have a business-specific credit card, here’s another reason to make the switch: In many situations, a small business credit card comes with higher spending limits than a personal card, which can be a big plus when managing cash flow.

Dedicated business cards not only help separate credit reporting, but also provide valuable, consolidated expense tracking. Many cards offer online reports and year-end summaries that help monitor spending, streamline bookkeeping, and categorize expenses for taxes.

Finally, the decision often comes down to practicality, especially for business owners who already have a lot of irons in the fire. An increasingly digital world means purchases through vendors and other partners are simplified by the ability to input a credit card number online.

Choose Your Cards Wisely to Reap Rewards

The good news? Credit card companies recognize the nuances of different business needs and credit uses. Competition is intense among card vendors, and they’re placing innovative value adds into the mix. The result is myriad card choices — all with different terms, credit limits, rewards, and perks.

The key to finding the best fit is to have a good idea of your company’s upcoming needs and spending patterns. If you’re looking to fund operating expenses, for example, a 0 percent annual percentage rate card can be used in lieu of a loan as long as you’re able to pay off the balance on time. Or if you’re focused on reducing costs (and who isn’t?), cash-back cards might make sense for everyday purchasing.

Many cards award extra points for specific types of expenses, such as office supplies, wireless phone service, or fuel. For businesses doing significant digital advertising, paying the costs on a card that offers triple points for ad spending is a no-brainer.

Too often, business owners leave thousands of dollars on the table by using debit cards or credit cards with limited reward programs, so investing a little time into comparing cards is well worth the effort. The objective is to find the reward programs that earn the most relevant points for your business.

Maximize Points Like an Expert

After you have the right credit card and reward program for your business, you need to focus on earning and redeeming rewards. This won’t take as long as you think. Simply take a strategic and consistent approach. Points can add up quickly, so you’ll want to learn how to redeem them for maximum value.

A general benchmark is to aim for a 1 to 2 percent return for your points, which is typically achievable without too much hassle. Take the extra points for ad spending as an example: If your company spends $30,000 on Facebook ads and your card awards three points for every dollar, you’ve earned 90,000 points — and that’s worth at least $900 when redeemed. You now have a solid 3 percent return on ad spend.

One of the best ways to get the most value is to redeem your points for travel, whether it’s for business or strictly for personal reasons. American Express Co., JPMorgan Chase & Co., and Citigroup Inc. all have their own travel portals that enable you to book trips using the points earned with their cards. This eliminates concerns about blackout dates or finding “award space” on flights.

Here’s how it works, using AmEx as an example: Booking through the American Express Travel portal, the points you’ve earned have a fixed value of 1 cent per point. So if you have 100,000 points, you can book $1,000 worth of travel. Or let’s say you have one of the Chase cards and you book through its travel portal. That can yield 1.5 cents per point, which means that your 100,000 points are worth $1,500. Now all you need to do is find a seat, book a hotel room, and go.

To further maximize your points, consider transferring flexible reward points, like Chase Ultimate Rewards, Citi ThankYou Points, or AmEx Membership Rewards to your card vendor’s airline and hotel partners. This can give you the ability to redeem the points for even greater value.

For example, I recently booked a round-trip, first-class ticket to Japan on All Nippon Airways by transferring my AmEx points to my Virgin Atlantic frequent-flier account. Once the points were transferred, I was able to book the fare with ANA, which partners with Virgin Atlantic. While this was a little more complicated initially, the results were well worth it.

Transferring the points to my Virgin Atlantic frequent-flier account netted me a 30 percent transfer bonus, thanks to a promotion that American Express were running. The added bonus reduced the number of points needed to book my flight (instead of 120,000 points, I needed just 93,000). In March, I’ll use my points to go to Japan with my wife, Erin — traveling round-trip in first class. That works out to a remarkable return of 22 cents per point. And that round-trip ticket in ANA’s first-class cabin? When I booked it, it was priced at more than $21,000 per person.

3 Ways Credit Cards Can Add to Your Bottom Line

Whether your return is 2 percent or 22 percent, it’s always better than not earning rewards for money you were going to spend anyway. The key is doing your homework upfront and staying on top of program changes and upgrades. To increase your rewards and make your money go further, focus on these three ideas.

1. Don’t Settle for One Point per Dollar

Audit your company’s quarterly spending to identify the categories where your totals add up. Then, go out and look for a credit card that offers bonus points (anything more than one point per dollar) in that category. Bonus points outperform a straight cash-back card nearly every time.

Some cards offer two, three, or even five points per dollar on travel purchases. Others offer that on categories such as shipping expenses or phone bills. To maximize your return, you may need multiple cards that you can strategically use for different spending categories. And you’ll want to continuously reevaluate your spending and the reward offers available to ensure that you earn as much as you can.

Here’s a good example. The Chase Ink Business Preferred card offers three points per dollar — a 3 percent return — in several categories, including travel, shipping, and social media advertising. If you redeem those points for travel via Chase’s travel portal, the points can be worth up to 1.5 cents each. Add that to your 3 percent, and you’ve earned a return of at least 4.5 percent of overall value.

2. Seek Maximum Flexibility

Along with category bonuses, look for transfer flexibility when selecting a card. Most of the time, credit cards that earn flexible points have more redemption options than airline or hotel rewards cards.

There are four main credit card vendors with flexible point programs: American Express Membership Rewards, Chase Ultimate Rewards, Citi ThankYou Rewards, and Marriott. With any of these, you can transfer the points you earn to the program’s partner vendors. As illustrated by my Japan trip, transferring and combining your credit card points with other rewards earned through airline or hotel loyalty programs can reap very generous returns.

In addition, many cards allow you to transfer points to designated users such as your spouse or business partner. This can be invaluable for both business and personal travel redemptions.

Navigating the transfer rules can get complicated, though, as each of the four major programs has different transfer requirements. Be on the lookout for expert tools and guidance from reputable sources. And if you don’t have time to figure it out, don’t abandon the savings; you can hire companies to handle the transferring for you. Even after paying the fee, you’ll still come out well ahead.

3. Multiply Your Points-Earning Power

Another way to increase your rewards is to add employees as authorized users of your business card. Businesses of any size that have multiple employees spending or traveling on behalf of the company can benefit, especially when the bonus reward points are aligned with the employee’s spending categories. Multiple users can also help meet the minimum spending requirements for bonuses.

As with all things related to credit and finances, be selective when adding authorized users. As the primary cardholder, the business is ultimately responsible for all purchases using the card. If an authorized user runs up unplanned charges that are difficult to pay off, it can affect the business’s (and often the business owner’s) credit score.

Here’s the best way to think about reward programs: Credit card companies are willing to pay you to make purchases. When it’s money your business will spend no matter what, taking full advantage of the rewards available to you makes your budget stretch more than you thought possible.

If your company spends $200,000 annually, for example, and you put it all on a basic rewards card, you’ll earn a point for every dollar. And with just a little extra effort, you can identify the right combination of credit cards that will average you at least two points per dollar spent, easily doubling the previous number.

The rewards are out there waiting to be claimed. Why give up free money?

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  1. You really need to read the rewards of your card in order to maximize it. Many collect rebates but don’t really get around to using them.

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