Small Business Resources is now the Center for Business Empowerment.
January 29, 2024 | 6 minute read
Written by
Rieva Lesonsky
President and CEO
GrowBiz Media
Rieva Lesonsky is president and CEO of two companies focusing on small business and entrepreneurship—GrowBiz Media and SmallBusinessCurrents.com. She’s a nationally-known speaker, best-selling author, award-winning journalist, and authority on entrepreneurship who has covered the industry for more than 40 years.
When it comes to managing finances for a small business, every little bit helps. Unlike large corporations with deep pockets to cover slow seasons and market fluctuations, small business owners often are unprepared for an unexpected expense.
So, getting something back for spending money sounds like a win, yes? One chief way small business owners can build up their cash reserves is by using credit cards that offer rewards in either cash back or points. These cards allow you to earn incentives when you spend money. For businesses, the rewards can add up quickly and may end up saving your small business some additional money.
Not sure how to get the most out of rewards credit cards? Here are a few tips to guide you:
Once you start researching rewards credit cards, you may be shocked by the number of cards and the different options for cash back deals and rewards available. The key is to pick the credit card (or cards) that offer rewards best suited for your business needs, as well as your own. For example, if you’re a frequent flyer, you may want a card that provides the ability to earn miles on your preferred airline’s loyalty program. If you drive a lot, look into credit cards with offers of rebates on gas or other rewards beneficial to your business. The same goes with hotel stays, restaurants, etc.
Some business owners prefer to use cards that offer a broader range of rewards that provide flexibility. For example, since travel slowed due to the pandemic, many cardholders with airline and hotel rewards cards were not able to realize the full benefits of their cards.
In general, there are three types of credit card rewards programs:
Cash back generally means the credit card program is designed to offer the ability to redeem earned rewards in the form of cash, such as a deposit to your business checking account, check mailed to your business, or credit card statement credit. There are many flavors of cash reward products, with some providing rewards earned as the actual dollar amount available to redeem, while some earn points that can be redeemed for cash back options.
Credit cards that offer points as rewards generally provide more redemption options, such as travel, merchandise, gift cards, or cash back. If you like the variety of options, be mindful that each redemption option may come with a different value for each point redeemed.
Cobranded airline credit cards typically allow users to earn airline frequent flyer miles on purchases made with the card. While some cards allow you to use the miles without restriction, most mile-reward programs require users to reach a threshold before miles can be used. However, most airline credit card programs provide additional benefits such as free checked bags, or priority boarding, that frequent travelers find appealing beyond earning miles.
Before you sign up for a rewards card, it’s important to know what you’re getting back since the amount and type of rewards vary by program.
This is the most straightforward program type with a fixed percentage of cash back, points, or miles earned with each purchase you make. For example, if you have a 1.5% flat earn credit card, and you make a $100 purchase you will have earned $1.50 cash back, or 150 points with a points card.
This program type provides you with the ability to earn a different amount of rewards depending on the merchant category per purchase. For example, earn 3% cash back when you buy your gas, and earn 2% when you eat out, and 1% cash back on all other spend. This is a great way to maximize your rewards earn, but keep in mind that most of these programs have annual caps on how much can be earned.
Airline frequent flyer miles and hotel points can accrue in the same fashion, but the difference is that these rewards will fall under the rules of the airline or hotel loyalty program. Every program will have its own award and redemption rules, so make sure to consider your specific goals to maximize your rewards.
Because credit cards are revolving credit, it’s important to pay off as much of the balance as you can every month (preferably all), so the funds are available to use and earn more rewards. Also, check on redemption distribution timetables (or how long the rewards take to be redeemed). For example, cash back rewards are typically immediate, while gift card redemption may take longer.
Many rewards credit cards also offer “signing bonuses” and special reward days when purchases earn extra awards.
There are some things to watch out for in the fine print:
Some rewards have an expiration date, so be aware of your rewards balance and your redemption options. Also, new deals appear all the time. So, enable notifications on your mobile app to tell you when a new deal appears.
To provide rewards, some cards may charge higher interest rates than non-rewards cards. So, in addition to introductory rate offers, please be mindful of the ongoing interest rates for purchases, balance transfers, and cash advances.
Credit card companies offer various card options, and not all offer the same rates or rewards. Double-check that you’re signing up for the right card.
Some cards allow you to transfer points to a partner business of theirs, which can be even more rewarding if you’re earning points from that business as well.
Some banks offer loyalty programs that include benefits and rewards for everyday banking. These can include incentives such as bonus rewards on eligible business credit cards. You may need to qualify in order to take advantage of loyalty programs, but they can be a great way to get rewarded for the business you already do.
Before committing to any rewards card, take a moment to prioritize your business’ needs. How can you best use the rewards you’ll earn? How will you keep track of your rewards, so you can best take advantage of them? The best rewards cards make it simple, fun and interactive to earn and redeem awards that best benefit your business.
Important Disclosures and Information
Bank of America engages with Rieva Lesonsky to provide materials for informational purposes only, and is not responsible for, and does not guarantee or endorse any of the third-party products or services mentioned. All third-party logos and company names mentioned herein are the property of their respective owners and are used under license from Rieva Lesonsky.
Bank of America, Merrill, their affiliates and advisors do not provide legal, tax or accounting advice. Consult your own legal and/or tax advisors before making any financial decisions. Any informational materials provided are for your discussion or review purposes only. The content on the Center for Business Empowerment (including, without limitations, third party and any Bank of America content) is provided “as is” and carries no express or implied warranties, or promise or guaranty of success. Bank of America does not warrant or guarantee the accuracy, reliability, completeness, usefulness, non-infringement of intellectual property rights, or quality of any content, regardless of who originates that content, and disclaims the same to the extent allowable by law. All third party trademarks, service marks, trade names and logos referenced in this material are the property of their respective owners. Bank of America does not deliver and is not responsible for the products, services or performance of any third party.
Not all materials on the Center for Business Empowerment will be available in Spanish.
Certain links may direct you away from Bank of America to unaffiliated sites. Bank of America has not been involved in the preparation of the content supplied at unaffiliated sites and does not guarantee or assume any responsibility for their content. When you visit these sites, you are agreeing to all of their terms of use, including their privacy and security policies.
Credit cards, credit lines and loans are subject to credit approval and creditworthiness. Some restrictions may apply.
Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S" or “Merrill") makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp."). MLPF&S is a registered broker-dealer, registered investment adviser, Member SIPC, and a wholly owned subsidiary of BofA Corp.
Banking products are provided by Bank of America, N.A., and affiliated banks, Members FDIC, and wholly owned subsidiaries of BofA Corp.
“Bank of America” and “BofA Securities” are the marketing names used by the Global Banking and Global Markets division of Bank of America Corporation. Lending, derivatives, other commercial banking activities, and trading in certain financial instruments are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Trading in securities and financial instruments, and strategic advisory, and other investment banking activities, are performed globally by investment banking affiliates of Bank of America Corporation (“Investment Banking Affiliates”), including, in the United States, BofA Securities, Inc., which is a registered broker-dealer and Member of SIPC, and, in other jurisdictions, by locally registered entities. BofA Securities, Inc. is a registered futures commission merchant with the CFTC and a member of the NFA.
Investment products:
