The Pros and Cons of Small-Business Credit Cards | Photo of an

Rita Pouppirt

The Pros and Cons of Small-Business Credit Cards

•  5 minute read

Small-business credit cards can save you up to a few percent on your purchases. But if you carry a balance, they aren’t for you.

Earning credit card rewards is becoming more and more common with personal credit cards. Can businesses earn credit card rewards, too? Believe it or not, there are plenty of small-business credit cards that offer rewards or cash back on your business’s everyday purchases.

The real question is should you, as a small-business owner, bother trying to earn credit card rewards? Is it worth it? The answer depends on your particular situation and the rewards card you sign up for.

 

When Small-Business Credit Cards Make Sense

Credit card rewards can earn you a few percent cash back or other benefits, depending on your purchases and what cards you have.

“Business owners should pursue credit card rewards if they are debt-free and have a good handle on their debts and cash flow,” says Holly Johnson, credit expert and co-founder of Club Thrifty. “If you are able to pay your bill in full each month, a solid rewards card can help you earn cash back or travel rewards for each dollar you spend.”

This way, you won’t have to pay any interest and the credit card rewards you earn are yours to keep. But if you do end up carrying a balance, you’ll probably pay more in interest than the rewards you’ll earn. If you’re concerned about this, a tool like Debitize can help you avoid carrying a balance. It uses money from your checking account to automatically pay off credit card purchases.

Another important factor to consider is how you make your purchases. If you make the majority of your business’s purchases on a credit card and don’t have the option to take advantage of a cash discount, a rewards credit card could help you earn some cash back.

Finally, you should consider how much cash back you can really earn. If your small business spends only $100 per month on purchases you can put on a credit card, then getting a rewards credit card probably isn’t worth the hassle. However, if you spend $40,000 per month in eligible credit card purchases that you can earn two percent cash back on, you can earn $9,600 per year in cash back on those purchases.

 

When a Small Business Should Avoid Rewards Credit Cards

Not every small business should bother trying to earn credit card rewards.

“Business owners should avoid pursuing credit card rewards if they plan to carry a balance each month,” says Johnson.

“Most rewards credit cards come with extremely high interest rates. As a result, carrying a balance can become an expensive proposition in a hurry.”

If you need to carry a balance, search for small-business credit cards that offer low interest rates or loans to minimize your interest expenses.

Small business owners should also skip rewards credit cards when their vendors already offer discounts for paying in cash or equivalents like checks. Credit card transactions come with processing fees that create an additional expense for your vendors. For that reason, you might get a better deal by paying with cash than with a rewards card. However, if the rewards you’d earn with a credit card exceed the cash discount, the card might be the better way to go.

Small businesses may want to skip out on rewards credit cards if their vendors offer merchant credit with terms that allow for discounts for early payment. For instance, if a vendor offers a five-percent discount for paying in cash within 10 days, you’d likely be better off taking advantage of this offer than the couple of percent you’d earn with credit card rewards.

 

5 Small-Business Credit Cards You Might Want to Consider

If you think a rewards card might be a good fit for your business’s purchasing needs, there are a few small-business credit cards that you should consider.

To find the best card for you, first estimate your future spending. Then research which card would earn you the most value based on how you would redeem your rewards. “Some rewards cards offer more points in categories like office supply stores, cable and internet, or shipping,” says Johnson.

“The best rewards card for you is one that will give you extra points where you spend the most.”

Don’t forget to subtract the cost of any annual fees. And remember, since you’ll pay your balance off in full, the APR charged shouldn’t matter. That said, we’ve listed them just to show you how high they can be.

1. Chase Ink Business Preferred

The Chase Ink Business Preferred credit card offers three points per dollar spent on the first $150,000 of combined purchases each account anniversary year for travel, shipping, internet, cable, and phone services, as well as advertising purchases with social media sites and search engines. You’ll earn one point per dollar spent on all other purchases.

You can redeem points for cash back at a penny per point or for travel at a value of 1.25 cents per point. Or points can be transferred to its travel partners. There is a $95 annual fee for this card, and the APR varies from 17.99 percent to 29.99 percent, based on your creditworthiness.

2. The Blue Business Plus Credit Card from American Express

The Blue Business Plus Credit Card from American Express offers two points per dollar spent on all purchases up to $50,000 each calendar year. You’ll earn one point per dollar spent on purchases that exceed the $50,000 limit.

You can redeem points for a statement credit at a value of 0.6 cents per point or for gift cards at a rate from half a cent to one cent per point. There’s no annual fee for this card, and the APR currently is 13.24 percent, 17.24 percent, or 21.24 percent, based on your creditworthiness.

3. Capital One Spark Cash 

The Capital One Spark Cash credit card offers unlimited two percent cash back on every purchase. The annual fee is waived the first year, but is $95 each year thereafter. The card’s APR is currently 18.74 percent.

4. Chase Ink Business Cash

The Chase Ink Business Cash credit card offers five percent cash back on the first $25,000 in combined purchases each account anniversary year at office supply stores as well as internet, cable, and phone services. It also offers two percent cash back on the first $25,000 spent in combined purchases each account anniversary year at gas stations and restaurants. Plus, you’ll receive one percent cash back on all other purchases.

This card has no annual fee and an APR of 15.24 percent to 21.24 percent, depending on creditworthiness.

5. SimplyCash Plus Business Credit Card from American Express

The SimplyCash Plus Business credit card from American Express offers five percent cash back at U.S. office supply stores and on wireless telephone services purchased directly from U.S. service providers. It allows you to pick one of the following categories to earn three percent cash back in:

  • Airfare purchased directly from airlines
  • Hotel rooms purchased directly from hotels
  • Car rentals purchased from select car rental companies
  • Gas stations in the U.S.
  • U.S. restaurants
  • U.S. purchases for advertising in select media
  • Purchases for shipping within the U.S.
  • U.S. computer hardware, software, and cloud computing purchases made directly from select providers

You’ll also earn one percent cash back on all other purchases. This card has no annual fee, and the APR is currently 14.24 percent, 19.24 percent, or 21.24 percent, depending on your creditworthiness.