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Small business, big rewards from credit card companies

By Katie Ford

She's an ambitious, lean-running machine with big dreams, and lenders are clamoring for her attention. She's America's small business owner. As credit card companies continue to court small business owners, the rewards programs grow increasingly sweet, from free roundtrip tickets on major airlines to double rewards points for every dollar spent. In this competitive market, small business owners have plenty of potential suitors.

Small business credit card rewardsThe Small Business Administration reports that the largest lenders in the United States -- those with more than $10 billion in assets -- continue to dominate the market for small business loans, especially in the credit card market, where they account for 75 percent of the total number of loans.

"It's a $2.2 trillion market that represents more than half the national GDP," says Rosa Alfonso, an American Express spokeswoman.

Of that $2.2 trillion, only 13 percent is spent on credit cards, says Alfonso, which leaves the door open for lenders to offer myriad financial products to increase the working capital of America's small business owners.

According to Visa USA, small business spending on small business cards has risen 20 percent annually since 2000. Visa also reports that, during that same time, volume on Visa's small business products has increased 33 percent.

"Trends indicate that more businesses are moving away from checks as a form of payment and are looking to utilize credit or debit card options in their operations," says David Cramer, Visa USA senior vice president of commercial solutions.

Small business owners certainly have plenty of options, and they'll be rewarded no matter which way they turn.   

Discover
Discover launched its campaign to gain small business customers about two years ago, says Sastry Rachakonda, director of the company's business cards division.

"Based on my experience in this industry, I'd have to say that cash-back rewards programs are far more popular with small business owners," he says. "Most small business owners operate on tight budgets; they're always focused on the bottom line. So, in this market, cash is king."  

The Discover Business Card offers:

•  5 percent cash back on office supplies.
•  2 percent cash back on gas.
•  1 percent on all other purchases.
•  Fee-free PurchaseChecks to pay suppliers who don't take credit cards.

Moreover, for avid business travelers, the Discover Business Miles Card allows cardholders to earn double miles on gas and travel purchases.

Capital One
It may have the longest title ever, but the Capital One Visa Business Platinum Preferred No Hassles Miles Card offers a shortcut to earning miles.

The basics:

•  Earn two miles per dollar on all travel and entertainment purchases made with airlines, restaurants, hotels, bowling alleys, buses/charters, car rentals, cruise lines, movie theaters, passenger railways, taxicabs/limousines, time shares, travel agents and video rental stores.
•  Receive free year-end summaries with annual costs separated by category, which can help itemize tax deductions.

Says Dave Wasik, senior vice president of Capital One Small Business: "This broadened definition of the travel and entertainment category, which has traditionally been limited to airline and restaurant transactions ... makes this card ideal for business owners looking for more flexibility in earning rewards on their travel and entertainment purchases."

Advanta
As the saying goes, it takes one to know one. Established in 1951 with $30 in seed money, Advanta is now one of the nation's largest providers of small business credit cards.

"The small business credit card market is growing, yet underrepresented," says David Goodman, a spokesman for Advanta. "Currently, there are approximately 30 million small businesses in the United States -- only about half of which have a small business credit card."

The Advanta Platinum Business Card offers:

•  5 percent cash back on gas, office supplies, utilities, computer equipment and wireless services.
•  1 percent cash back on all other purchases.

American Express
American Express has so many small business cards it'll make your head spin. Perhaps the flashiest potential suitor for small business owners is the Business Platinum Card. It offers:

•  Four complimentary coach-class companion airfare on domestic flights every year.
•  Complimentary access to business lounges in 400 cities worldwide.
•  Concierge service 24/7 to assist with your business and personal activities.

Of course, American Express also offers cash-back cards and its latest plastic creation: the Plum Card. Developed for small businesses with high materials costs and variable cash flow, it offers "flexible trade" terms -- the option to defer payment for two months or receive early pay discounts for just about everything purchased with the card.

"We believe in offering small business owners choice; What one small business owner values in a rewards card is different from what another values," Alfonso says.

Bank of America
Unveiled in May, the WorldPoints Rewards for Business Card doubles the fun with these added bonuses:

•  Earn two points for every dollar spent in purchases at restaurants, gas stations and office supply stores.
•  Easily transfer WorldPoints between your business and personal WorldPoints credit cards.

John Durrant, senior vice president of Bank of America's small business credit card division, says that small business cards differ from standard cards because they offer features such as:

•  Comprehensive spending controls on cards with multiple authorized users.
•  Robust reporting tools that track spending, and data that integrates well with popular bookkeeping software, such as QuickBooks or Quicken.
•  Rewards value propositions that are relevant to small business spending habits.
•  Cash-back incentives to keep money flowing in the business.

Discover's Rachakonda acknowledges that many players in the credit card industry are trying to woo small businesses, but not all of them will be successful in achieving long-term relationships.

"The companies that will succeed are those that understand the crucial differences between a small-business card and a personal card. You can't just take a personal credit card and slap the word ‘business' on it."  

Related stories: Five ways to avoid being 'stung' by business credit cards, Use of credit cards rises for business startup financing, Q&A: How business startup nailed down credit card debt

Published: May 6, 2008


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Updated: 09-28-2016


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