10 Key Factors for Your Small-Business Credit Card Approach

Running a small business offers great chances to optimize credit card rewards, but it also comes with specific challenges since much of the guidance on travel credit cards leans toward personal use rather than business-focused options.

Here are 10 important aspects to consider while developing a strategy to enhance rewards from your business expenditures.

Analyze Your Business's Major Spending Areas

Before diving into any other advice, it’s crucial to have a clear picture of your business’s spending habits—not only how much you spend but also where those expenses occur.

Begin by examining your business's expenditures and the relevant Merchant Category Codes to identify where you can maximize spending for earning more points per dollar. Next, evaluate the rewards from your current business credit card; is there a better option available?

If your business incurs significant shipping costs, you'll want a card that offers additional points in that category. Conversely, if you run a restaurant and frequently buy groceries, the ideal card for your business will likely differ.

Once you've assessed your primary spending areas, search for cards that provide bonus points or miles in those categories. You might even think about applying for the top card in each of your regular spending categories to maximize every transaction.

Reflect on whether achieving elite status is important to you

Achieving elite status through spending is feasible within various airline and hotel loyalty programs. Depending on the specific program, you can accelerate your progress or earn status purely through spending, all from the comfort of your home. If you own a small business that allows substantial spending on a co-branded credit card, this could be an excellent chance to achieve elite status in a program you value.

When weighing this decision, assess the value of this status to you and compare it to the previous sections to ensure you're maximizing rewards on every purchase. Each individual's circumstances vary, so you need to determine which option offers the most value based on your business's spending patterns.

Create a collection of complementary cards

If your business expenses span various categories, consider a card that provides bonus rewards across multiple relevant categories—or you might opt for several cards that work well together.

If your spending spans areas like social media advertising, shipping, wireless services, and other categories not covered by a single credit card, seek out cards that offer strong rewards in those specific areas. Opt for the card that provides the highest rewards in that category and designate it as your primary payment method with the corresponding vendor(s).

Choosing a preferred credit card for transactions with various vendors can maximize your rewards on every purchase. It also helps prevent confusion, ensuring you or an employee doesn't mistakenly use the wrong card and potentially forfeit thousands of points.

Exercise caution when using personal cards for business expenses

Personal credit cards often come with great benefits, such as generous sign-up bonuses, elite status with your favorite hotel, or additional rewards in categories where your business frequently spends. While using a personal credit card for these purchases isn't inherently wrong, be mindful of how a high balance on your monthly statement might affect your credit score.

A substantial 30% of your credit score is influenced by your credit utilization, which shows how much you owe relative to your total credit limit. For instance, if you have one credit card with a $10,000 limit and a $1,000 balance, your utilization rate is 10%.

Charging significant business expenses to personal credit cards can affect your credit report and lower your score. In contrast, most business credit cards do not show up on personal credit reports, so large expenses on these cards typically won't impact your credit score.

Calculate the figures to justify an annual fee

While it's attractive to find cards with high earning rates, they often come with higher fees. Crunching the numbers can help you determine the best card for your business.

Essentially, you want to identify the "break-even point" where the extra miles you earn will cover the annual fee.

Here's how the calculation works:

Annual fee ÷ Value of extra rewards per dollar spent (as a decimal) = Total spending needed to break even

Use this method when deciding between two credit cards if you intend to apply for just one. If one card has a higher annual fee, assess how much you need to spend to accumulate rewards that offset that fee. If you believe you won't reach that spending amount, a card with a lower earning rate and a reduced annual fee may be more suitable for you.

Familiarize yourself with the rules and limitations

With personal credit cards, we often encounter clear regulations such as:

"You cannot qualify for a new cardmember bonus on this card if you have applied for or received a bonus on this card in the past 24 months."

I can't recall how many times individuals reference this rule concerning the Chase Ink family of business credit cards. However, no such rule exists.

For entrepreneurs managing multiple businesses, it may be beneficial to keep your expenses distinct, making it logical to have a separate credit card for each venture.

There are certainly other application rules to consider, but don’t be misled by the frequent mention of this nonexistent 24-month rule concerning Ink credit cards.

Aim for substantial bonuses if you're a big spender

Different businesses have varying spending levels. Not every business owner will qualify for large bonuses, and that’s perfectly fine. However, seize the opportunity to earn them when they arise if it aligns with your business needs.

For instance, the Capital One Venture X Business provides 150,000 bonus miles after a $30,000 spend within the first three months of account opening.

However, not all small businesses can meet the $30,000 spending threshold in three months, which leads some owners to overlook these offers. If your business has this level of spending capability, be on the lookout for bonuses that reward significant expenditures.

This also holds true for banks that offer cash bonuses for new business checking accounts after completing specific actions. Typically, more valuable bonuses require higher spending or larger deposits into the new account. Make the most of your business’s spending power if this is relevant to you.

Choose the right card for substantial purchases

While we often discuss using the optimal credit card for various categories to maximize rewards, we don't highlight enough that some credit cards provide bonus points and miles for larger purchases.

For example, The Business Platinum Card® from American Express rewards you with 1.5 Membership Rewards points per dollar on purchases of $5,000 or more (up to $2 million in purchases each calendar year). In a similar vein, the Ink Business Premier® Credit Card provides unlimited 2% cash back on everyday spending, increasing to 2.5% on purchases of $5,000 or above.

In addition to higher earning rates on your existing cards, think about applying for a new credit card if your business anticipates significant spending. This could present a perfect chance to fulfill the spending requirements for a welcome bonus on a new card, offering returns of more than 2%-3% on your expenditures.

Keep an eye out for bonuses related to adding employee cards

American Express frequently runs promotions to add authorized users on personal cards and employee cards on business accounts. Taking advantage of these deals can lead to earning hundreds of thousands of bonus points.

Keep in mind that there are limits on the number of employee cards you can add to an account; not everyone is eligible for these promotions. Additionally, these offers typically come with spending requirements, which are generally 'per card', meaning you must meet the spending criteria for each individual employee card to earn the associated bonus.

We've recently observed a significant rise in welcome bonuses for adding and utilizing employee cards. You might come across a welcome offer such as "Earn X points after spending $5,000 in your first three months. Earn an additional X points when you add an employee card and spend at least $1,000 on it within the first three months." Keep in mind that these offers are targeted, so not everyone will receive the same ones.

If other employees are making purchases for your business, adding them strategically can significantly boost your points and miles balances. Just remember that you are ultimately responsible for all expenditures on the account.

Make sure to take full advantage of your cards' benefits

This advice is relevant for all credit cards, whether business or personal. If your card comes with an annual fee but you're not taking advantage of its perks and benefits, it's likely not worth the cost.

Make sure to utilize benefits like the cellphone protection offered by the Ink Business Preferred® Credit Card and the monthly wireless statement credits of up to $10 from the American Express Business Platinum Card. Additionally, the Business Platinum provides hundreds of dollars in annual credits for Dell, Indeed, and Adobe that you can redeem each year.*

Review your card's benefits and identify ways to maximize them. If you find it challenging to do so, assess the overall value of these benefits to see if they justify the card's annual fee (if applicable). If you're not receiving greater value than the fee, and if the rewards can be matched with another card, it might be time to consider closing this credit card to save money annually.

*Enrollment required for select benefits.

In conclusion

Small-business owners have a distinct advantage when it comes to maximizing their points and miles. While each business may have different spending patterns, these are the key factors to consider while developing a credit card strategy to enhance your rewards.

An effective approach for your business credit cards should also align with your personal credit card strategy. By harmonizing both strategies, you can significantly boost your earnings.

Ultimately, it’s crucial to grasp your business’s spending levels and categories. This awareness will help you identify attainable bonuses and ensure you’re using the right credit cards to optimize your rewards on every purchase.