Finding the right card matters if you’re a business owner and looking for a small business credit card. But what you do with the card, and how you use it, matters even more.
In other words, those rewards and exciting business credit card offers don’t really matter much if you aren’t using them or using them well. So, if you’re looking for tips on how to use your business credit card to save money rather than borrow money and add to your debts, you’ll want to consider the following.
Use the rewards for your business, not yourself
Sure, if you’re a one-person company, you might make the executive decision to take cash back, points and miles and hoard them all for yourself, but it’s generally considered a best practice to keep your business and personal finances separate.
Certainly, many business owners make a good case for reinvesting rewards back into their company.
“Every reward is funneled back into the business,” says Alex Schlesinger, founder and CEO of Active Mutual, a life insurance company based out of New York City. “We use the points to cover airfare for employees to go to tradeshows, training, or even giveaway trips at company parties.”
In fact, Schlesinger, who has 10 insurance agents working for him, says that last summer, he used half a million points for airfare and gave it to his best-performing employee so he could take himself and whoever he wanted on a two-week trip to Europe.
Justin Belmont agrees with the sink-the-rewards-into-your-business strategy. Belmont is the CEO of Prose Media, a marketing and staffing agency in New York City, and uses the card_name discontinued_disclaimer, which, he says, aligns perfectly with his company’s spending habits.
“Rewards like statement credits help offset incidental costs like travel for client meetings or even team lunches during crunch time,” he says.
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Use cash back to pay for recurring expenses
That’s what Dawn LaFontaine does. LaFontaine is the founder and owner of Cat in the Box LLC, headquartered in Ashland, Massachusetts. The company is an online retailer that specializes in cat toy products.
LaFontaine says that she spends a hefty amount of income on Amazon’s pay-per-click (PPC) ads. That is, if someone clicks on one of her cat toy ads on Amazon, she has to pay Amazon.
“If your business is an e-commerce business, like mine, that sells on Amazon, you already know how quickly your PPC dollars can add up,” LaFontaine says. “But one way to take a little bite out of this ad spend is to use a cash-back credit card to pay for it. Every few months, I cash in my reward dollars and use them to offset that month’s credit card bill directly. If you use a 2% cash-back card, it’s like getting a 2% discount on your PPC.”
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Time purchases to maximize rewards during promotional periods
Following the lead of another business executive, this is what Brian Kroeker, president of Little Rock Printing, does. Little Rock Printing is an e-commerce printing solutions company based out of Calgary, Alberta, in Canada. Kroeker has 12 employees and four business cards. Kroeker says that one of the four cards, his operation manager and employees can use to make business purchases. The other three, he solely handles.
Kroeker says that, like many business owners, he uses credit card points and cash back and reinvests it right back into the business. But one strategy that he employs that really helps, he says, is timing certain larger purchases to his credit card’s promotional periods.
For instance, if one of his cards offers more cash back or points for office equipment during the months of March through May, he might buy some high-end printing equipment then (if it makes sense, of course), so while he is spending a lot, he’s saving more, too. If a card offers more bang for his buck for travel purchases in the summer, he might plan to go to a trade show then.
“If used correctly, especially with businesses who have high end expenses, credit cards can act as a financial strategy and not just a payment tool,” Kroeker says, crediting his father, the original founder of Little Rock Printing, for passing on that strategy to him.
Belmont does something similar. “Our big expenses — like software subscriptions, cloud services, and other tech-related costs-fall into categories that earn 4x points. Over time, those points have covered everything from flights to client gifts, effectively reducing out-of-pocket costs,” says Belmont.
He says that he times big purchases strategically. “I schedule annual subscriptions during months when we anticipate higher spending to maximize the rewards haul. For example, renewing all our software licenses in December not only consolidates expenses for year-end tax tracking but also earns a big points boost.”
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Actually use the perks that come with your cards
Belmont says he really likes the card_name‘s expense tracking tools. “It simplifies bookkeeping,” he says. “Auto-categorization cuts down on time spent reconciling transactions and makes tax prep less stressful.”
And, of course, if you travel a lot, many business travel credit cards come with perks such as free check bags, baggage delay insurance, lost luggage reimbursement and trip delay reimbursement. And, of course, if you pay for your business cell phone with your business credit card, you may get cell phone protection, reimbursing you for a stolen or broken phone.
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The bottom line on small business credit cards
Business credit cards, just like personal credit cards, are pretty much what you make of them. They can be a help or a hindrance.
“Credit cards are basically my business sidekick — they help us manage expenses while giving a little extra back,” says Belmont.
LaFontaine says that she opened up her business credit card in her business’s name so that her business could develop its own credit history. She says it’ll help her if she needs to take out a business loan in the future.
But aside from using the rewards as strategically as possible, the main thing is to avoid taking on debt on a credit card, otherwise, the debt eats into your savings and profits.
“The key is to have a plan,” Schlesinger says. “Mismanaging your card can lead to high-interest costs and a lot of pain down the road.”
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