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Small-business: Rewards debit cards vs. rewards credit cards

Both payment forms offer benefits and convenience to small business owners; here’s how they compare and how you can use them to your advantage

Summary

From offering cash flow flexibility to giving you the ability to earn rewards, small business credit cards and business cards can help you grow your business if chosen wisely. Which one is best for you? These tips will help you decide.

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Saving your business money is a big deal. The more you save, the more cash flow you can free up to cover expenses or fund your next big growth project.

Business debit rewards cards linked to your checking account can yield cash back or points on purchases. A business rewards credit card is another way to pile up cash, miles or points as you spend.

Comparing the pros (and potential cons) of each one can help you be strategic about business spending and saving.

See related: Corporate credit cards: How they work, benefits, drawbacks

Business debit cards: Rewards without debt

Using a cash back debit card for business purchases means paying now rather than later.

“A benefit of using your debit card over a credit card is that you simply don’t have to borrow the money; it’s very much just like spending cash,” says Bryan Woods, president of digital wallet app Spend. “You’ll save money by not having to pay interest on what was borrowed… you will not risk accumulating debt.”

Spending with a debit rewards card gives you power and control over your budget, says Woods, and “it ensures you’ll never spend funds you don’t have.”

That could be particularly important if you have a newer business and you’re just learning the ropes of budgeting.

“Debit cards may be helpful for business owners who are just starting out or when they need to keep a tight handle on cash flow,” says Jenn Garbach, head of brand and marketing, Capital One Small Business Card.

See related: How to dispute a debit card purchase

Get more spending power with a business credit card

Keeping debt in check is a good thing but uneven cash flow means borrowing is sometimes a necessity. When cash reserves come up short a business rewards credit card can close the gap.

“Credit cards allow business owners to make investments when they might not otherwise have access to capital at that moment,” says Garbach.

You may need to replace a pricey piece of equipment, for instance, or come across a great deal on inventory. Using your card to pay means there are no delays in getting the things you need to run your business.

Business credit cards favor rewards earners

How much can you earn in rewards with a business debit card? The answer depends on which card you’re using. Here’s a quick overview of some of the available options.

Card Rewards
KeyBank Debit Mastercard Business Card
  • Earn 1 point for every $6 in qualified transactions.
Delta SkyMiles Business Debit Card (Issued by SunTrust)
  • Earn 1 mile for every $2 spent on PIN point of sale or signature-based qualifying purchases (up to 2,000 miles per card monthly).
  • Earn additional miles on all direct Delta purchases such as tickets and in-flight purchases.
First Bank Business Debit Card With Rewards
  • Earn 1 point for every $3 spent on qualifying purchases.

Now look at how cash back earnings compare with some of the most popular business rewards cards.

CardRewards
Chase Ink Business Preferred Credit Card
  • Earn 3 points per $1 on the first $150,000 spent on travel and select business categories each account anniversary year.
  • Earn 1 point per $1 on all other purchases–with no limit to the amount you can earn.
American Express® Blue Business Cash Card
  • Earn 2% cash back on the first $50,000 in purchases each year.
  • Earn 1% cash back on the remainder of your purchases.
Bank of America® Business Advantage Cash Rewards Mastercard® credit card
  • Earn 3% cash back on a business category of your choice from a list of six.
  • Earn 2% on purchases at restaurants.
  • Earn 1% on all other purchases.
  • $50,000 purchase limit on combined 2% and 3% categories each calendar year, then 1% cash back.
Capital One Spark Cash for Business
  • Earn unlimited 2% cash back on all eligible purchases

Overall, the business rewards cards come out well ahead. They can also give business owners something a debit rewards card may not: an introductory rewards bonus.

The Chase Ink Business Cash Credit Card, for instance, has a $500 sign-up bonus when you spend $3,000 within the first three months of account opening. If you’re planning to spend that much from checking anyway, using a rewards card instead is an easy way to generate business savings.

See related: 10 things NOT to do when you apply for a credit card

Debit rewards cards are convenient

“Generally, with business debit and checking accounts you have the ability to do online banking and mobile money management,” says Woods.

You can see at a glance your current business inflows and outflows, as well as how much cash you have on hand to cover expenses.

Moreover, business checking accounts with debit rewards can have other helpful features, such as:

  • Low balance alerts
  • Credit and debit transaction alerts
  • Fraud alerts
  • Exports to business accounting software
  • Mobile check deposit

These features help business owners save time, says Woods, “and time is a valuable premium.”

See related: 3 major mobile payment security risks, and how to avoid them

Business credit cards trump debit cards for extras, security

Excluding mobile check deposit, business rewards credit cards share many of the same features as a debit rewards card. The list of benefits can beyond that, however.

“Beyond cash back, probably the best perk with a business card is if it has relationships with merchants” who can offer specific discounts when you pay with the card, says William Lipovsky, CEO of consumer education site First Quarter Finance.

Discounts are also available when you enroll an eligible card in the Visa SavingsEdge program. It’s an easy way to double dip on savings, since you’re already earning cash back or points with your card.

Woods says business credit cards can provide a credit score boost you won’t get with a debit card.

“Having a business credit card, using it responsibly and making timely payments will boost the credit rating of the business,” he says. Improving your business credit score could make qualifying for loans or securing lower interest rates on credit lines easier.

Business credit cards can be more secure and come with built-in tools to make accounting less of a hassle.

“Many offer fraud protections that ensure you won’t be liable for any fraudulent charges,” says Garbach. “Using employee cards is a great way to manage spending across the company and some providers offer free employee cards and allow business owners to set spending limits for each individual employee.”

Garbach says being able to generate quarterly and annual reports can help with financial planning. Capital One’s Spark Business cards “allow business owners to sync their purchases with accounting software like QuickBooks and Xero, lessening the burden of bookkeeping,” she says.

Other benefits may include extended warranty protection, return protection, roadside assistance and concierge service. Premium business rewards cards may have attractive extras such as complimentary lounge access or free checked bags.

These cards may carry higher annual fees but if you’re looking for more than just rewards, they can easily outstrip debit rewards cards.

Should you use both?

Doubling up on debit and credit card rewards lets you enjoy the best of both worlds.

“It’s helpful for business owners to have both credit cards and debit cards so that they can utilize both depending on the circumstance,” says Garbach.

In addition to banks, finance apps are putting their own spin on debit and credit rewards.

  • Acorns Found Money offers cash back when you spend at 200+ brands with a linked debit or credit card.
  • PayPal’s Business Debit Mastercard lets you earn unlimited 1 percent cash back on eligible purchases.
  • Zerocard is a debit card that acts like a credit card by giving you between 1 and 3 percent cash back on spending.
  • The Spring app connects to your credit card and credits cash rewards to your statement automatically when you spend at Spring Network merchants.
  • Spend has four Visa cards with rewards ranging from 0.2 percent to 3 percent back.

Venmo also recently launched a debit card. Although it’s not a rewards card, it’s convenient for making purchases and person-to-person payments.

Regardless of whether you’re looking to an app, debit card or credit card for rewards, do a pro/con analysis before choosing, says Lipovsky.

“It’s all well and good to get rewards, but if you spend too many frustrated hours on support or end up having to switch institutions it can all be for nothing,” says Lipovsky.

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Credit Card Rate Report Updated: October 16th, 2019
Business
15.18%
Airline
17.11%
Cash Back
17.25%
Reward
17.13%
Student
17.29%

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