Why Your Small Business Should Use a Cash-Back Card

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Whether you have a good year or miss your revenue goals, all entrepreneurs and small business owners want to boost their bottom line. One simple way to do this is by changing the payment method you use for business expenditures.

Choosing a credit card that earns rewards is essential for scaling startups and small businesses. Selecting a card with cashback rewards can add to your bottom line as you invest in your company. It is literally a way you can “spend money to make money.”

Related: How Entrepreneurs Can Scale And Save Money Without Startup Capital

How cash-back cards can help your business

As a consumer, you are likely aware of the many options for cash-back credit cards on the market today. Companies like Capital One, American Express, Chase and others aggressively advertise on TV, via mailers and other media.

You might see these advertisements and recognize the value of a cash-back credit card. You might even use one in your personal life. Many entrepreneurs and small business owners, however, do not connect the benefits of a cash-back card to their business.

Cash-back credit cards for businesses pay you back a percentage of the money you spend on business-related expenses. This includes expenditures on supplies for the office, gas and accommodations for business-related travel, vendor services and more.

The amount of cashback varies by card. Most companies offer a cash-back rate ranging from 1.5 percent to 5 percent. Such a refund might seem small, but the money you receive adds up when you consider how much you spend on your business.

Related: How to Choose a Business Credit Card?

Recouping money from a cash-back program directly offsets a portion of the money you spend on your business. This is money that goes straight to your bottom line without requiring extra work or expenditures on your part.

For example, our agency uses the Capital One Spark Pro credit card, which provides two percent cash back. This can augment our revenue by as much as $100,000 without adding to the payroll or requiring us to take on more projects.

What to look for in a cash-back credit card for your business

Entrepreneurs have a number of choices for credit cards with cash-back programs that are specially designed for business owners. When considering a cash-back credit card, evaluate the following:

Cash-back rate: How much money you are awarded for your business spending is not just a question of more. Although you want to maximize your cash back, it is also important to assess the other features of the card before you apply.

Minimum purchases: Some programs require you to spend a minimum amount of money before you are eligible for cash back. For entrepreneurs and small business owners with a high volume of business expenses, this is generally not an issue. However, if the monthly minimum is higher than what you typically spend, it may be best to look for a different card.

Spending categories: The awards on purchases vary by cash-back program. Some cash-back cards provide full reimbursement on any expenses related to your business, while others offer varying levels of cash back for different types of purchases. Be aware of the different levels of cash back when you sign up for a credit card and carefully review the terms and conditions so you are not confused by your rewards.

Cap-on rewards: The majority of programs offer cash back on all eligible purchases with no spending limit. However, some cards only provide the maximum cash back on purchases up to a certain amount of spending. Once you exceed this amount, your benefits are reduced. If you spend a lot on your business, you will want to make sure that your cash back is not subject to a cap. 

Bonuses: The attraction of cash-back credit cards is not limited to the extra money you earn on purchases. Programs vary in their incentives, but you may be able to take advantage of bonus cash after your spending reaches a certain level, $0 annual fees and more.

As with any credit card, it is also important to budget for annual fees, APR and other costs. Cash-back programs can help defray some of the expenses associated with the card, but you want to be aware of fees and interest rates that offset the money added to your bottom line.

Related: What 6 Money Pros Wish They’d Known About Credit Cards

Adding it all up

Many entrepreneurs have maxed out credit cards and even gone into debt to get a business off the ground. Given the expenses associated with starting and running a small business, credit cards can seem like both an essential ally and — when the balances are high — an implacable adversary.

Cash-back credit cards enable entrepreneurs and small business owners to invest in the company while getting something back. The rewards may seem small in terms of percentages, but the money you are reimbursed on purchases can add up to a large chunk of change.

Ultimately, businesses with a lot of purchases can add hundreds of thousands of dollars to the bottom line without having to work harder or hire more people.

Maria Flores

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