A typical small business needs to watch every penny. To last in the competitive business world, you need to maximize profits and just as importantly, reduce expenses. Many businesses don’t realize that they could easily be saving a percentage of their purchases with a cash back business credit card. Instead of letting bank fees eat away at your profits, your credit card can work for you.
How can the banks offer cash back for your business?
For decades the banks have been charging high interest rates and eating away at business profits. Businesses would just sit back, hoping the bank would eventually give them a better interest rate. Times are changing though. Today the credit card market is very competitive. A business can now choose between credit cards from nearly any financial institution.
As the banks compete, they are offering credit cards with better perks and rewards. If your business needs to travel a lot, you can get airline points. For a business that drives a lot, there are gas station rebate credit cards. Many larger stores even issue their own credit cards with special in store rebates. These credit cards lacked flexibility though. So as competition in the credit card market increased, credit card issuers resorted to offering cash back credit cards.
The banks can afford this to attain a new customer. The cash back is balanced out by interest charges and other fees. So for most people the cash back is just a savings on their bank fees. Plus these same customers might require additional financial services. The banks definitely aren’t losing much money by offering cash back.
Are cash back business credit cards just a scam?
No they are not a scam. These
credit cards actually do give your business money back. You just need to
be familiar with any restrictions. Most cash back business credit cards
have a maximum annual cash back limit. Other cards have different cash
back terms based on the credit card purchase type. For example, you might
get a different cash back percentage at a gas station compared to a grocery
store or office supply store. Some cash back credit cards also have a minimum
spending before points can be redeemed.
To get the most out of a cash back
credit card, you need to be disciplined. It is very tempting to put extra
purchases on your credit card to get more cash back. Only use this
strategy if you are able to pay off the card every month. Otherwise you
would just be accumulating more interest charges. If you can pay the card
off every month, try to use your credit card more instead of cash or checks.
For some businesses the cash back
maximum can also be a problem. A business with high operating expenses
could easily reach the annual cash back limit in a very short time. If
this is the case, consider getting a different credit card to use once the
limit has been reached. Some newer cash back business credit cards offer
no limit on the amount of cash back you can earn.
Before applying just read the terms
and conditions of the credit card. Many cash back credit cards use
phrases like ‘up to 5% cash back’. This usually means that you can only
get that cash back percentage for just one type of purchase or there is some
other catch.
Despite certain card restrictions, a
cash back credit card is a very good idea for your business. Your
business could be saving thousands of dollars on your business expenses.
Just take the time to compare different cash back business credit card offers
before you apply.