Business owners know that they need to have credit cards exclusively for business use and that they should not charge business expenses to their personal credit cards. This is still true even though there are alternative payment options, such as electronic transfers. What small business owners don’t know in many cases are the benefits and incentives that their business cards offer. Without this understanding, businesses may be wasting money by paying for costs that are included with their cards or missing out on opportunities to reap rewards. They may simply have the wrong card.
Here are some credit card benefits to check out:
Purchase rewards
It’s probably no secret that you can earn rewards through your business credit card, but exactly what the rewards are may be a mystery. Depending on the type of card you have, there are different reward programs that effectively reduce the cost of purchases you need to make. Examples of card options (I’m not endorsing any but merely showing some options):
- American Express Business Cards, of which there are several, can generate cash back through points an eligible purchases. For example, the Blue Business Cash Credit Card offers 2% cash back on some purchases and 1% on others, with no annual fee. Review all the American Express Business Cards here.
- Capital One Spark Cash for Business Card gives 2% cash back on all purchases.
- Chase’s Ink Business Cash Credit Card lets you earn 5% back on up to $25,000 a year in spending.
- Chase’s Ink Business Preferred Credit Card offers 3x points on shipping costs.
- Some other cards offers 3x points on gas and 2x to 5x for Facebook and Google advertising.
Discounts
Some cards offer discounts on certain purchases you make for your business. Discounts include, for example, FedEx shipping, buying office supplies, hiring through Indeed, certain Adobe purchases, and wireless service providers. Again, each card offers unique benefits, so check carefully on which are relevant to your business.
The American Express Plum Card offers a 1.5% early pay discount for paying your credit card bill within 10 days of the statement closing date.
Travel benefits
Again, depending on the type of credit card you have, there are various travel-related perks:
- Credit for applying for TSA Pre-check or Global Entry (you pay for this on the card and the charge is then credited back)
- Emergency medical assistance services when away from the company’s location
- Free checked bags
- Frequent flyer miles
- Insurance for car rentals (may be secondary insurance, which reimburses the deductible and other costs not covered by your personal policy)
- Passport replacement
- Priority boarding on airline flights
- Travel lounge membership
- Trip cancellation/trip interruption coverage
Instant loan access
The business credit card may effectively offer a line of credit by allowing for cash advances when and to the extent an owner needs the money. Interest is paid only on the amount of the line drawn and the loan is unsecured (no collateral is needed). The interest rate on cash advances usually is steep, so it shouldn’t be used casually. But access to quick cash fix can help you out of a cash emergency or take advantage of an opportunity. Credit lines—and cash advance limits—on business cards are usually higher than are personal credit cards.
NerdWallet has a listing of the best 0% APR business credit cards as of July 2024.
Build business credit
Owners usually are personally liable for their business credit cards, even if they don’t remember agreeing to this when they signed the credit card application. But as the business pays the credit card bill each month, it helps the credit rating of the company. The goal for small business owners is for the company to reach a point where their personal guarantees are no longer needed for business loans.
Financial and tax management
Business credit cards offer owners the ability to oversee spending. You can log into your credit card account at any time to see what’s going it. It’s very helpful to monitor spending by employees who have company cards. You may be able to set limits on employee spending—on the card so there are no overages. When selecting a business credit card, check whether there’s any additional fee for adding users; usually there isn’t, but you never know.
Credit card statements can be reconciled with your books and records. Some cards simplify downloading spending information to QuickBooks, Xero, or some other accounting software. Business credit card statements serve as substantiation for deductible expenditures.
Conclusion
There is no single business credit card that offers all of the benefits described above. It’s up to you to compare the credit card offerings and obtain the card or cards best suited for your business. Remember: there’s no law that says you can only have one card.
Read more about business credit cards in earlier blogs here.
