How business credit cards can help you run a business from home
Whether you're a freelancer, blogger or entrepreneur, the right business card can help you save on many expenses. Here's how
Making complex credit topics simple
There’s a lot to like about running a business from home.
You can set your own hours, pursue work you enjoy and, best of all, have casual Friday on a Tuesday if the mood strikes.
When you’re freelancing, blogging, consulting or running an online venture, a business credit card may not seem like a necessity. However, there are some benefits you may be missing out on by not having one.
Here are some tips for incorporating a business card into your financial plan when running a business from home.
See related: Best small business credit cards
How business credit cards can benefit your home business
Decide what you need most from a business credit card
Think about what purpose you need a business credit card to serve. Covering startup costs or day-to-day expenses might be a priority if you’re launching a brand-new business online.
“Credit cards can be one of the easiest ways to finance an online business,” says Gerri Detweiler, education director for Nav.com. “Unlike some types of financing that may be difficult to qualify for, credit cards shouldn’t be difficult to qualify for as long as the business owner has good personal credit scores and sufficient income.”
- When you have an established online business, improving your business credit score may be the goal if you plan to apply for a business loan or line of credit down the line.
- Using a business credit card for spending keeps those balances off your personal credit report, protecting your personal credit score, says Detweiler.
- Paying your card on time and maintaining a low balance can strengthen your business credit score.
Don’t count out earning rewards
Running an online business from home may mean having different or fewer expenses than a regular business. For example, business travel or dinner with clients may not show up on your budget radar.
That doesn’t mean you don’t have opportunities to earn rewards, however. You just need to be aware of where those opportunities lie.
“While I don’t have the traditional costs, I still have marketing costs,” says Andy Halliday, founder and CEO of digital marketing agency Coreter.
Between web hosting fees and paying for ads through Google and Facebook, his marketing bill adds up to a tidy amount each month. If you’re charging all your ad spending to a business card each month, whether it’s a little or a lot, “you can start to reap the benefits pretty quick,” he says.
Brandon Seymour, founder of digital consultancy Beymour Consulting, has managed to accrue nearly half a million rewards points with his Business Gold Rewards Card from American Express OPEN, primarily from advertising spend.
“If you’re running AdWords or using any other type of online platform for advertising, you can usually find a card that offers 3 to 5 points per dollar spent,” he says. “It really adds up over time.”
Consider these cards for earning rewards on online ad campaigns:
- Chase Ink Business Preferred Credit Card: Earn 3 points per dollar on the first $150,000 spent in combined purchases on advertising with social media sites and search engines, travel, shipping and internet, cable and phone services each year.
- Business Gold Rewards Card from American Express: Earn 3 points per dollar in one category of your choice, including advertising purchases in select media. 3X and 2X apply to the first $100,000 in purchases in each of the 5 categories per year, 1X point per dollar thereafter.
- SimplyCash® Plus Business Credit Card from American Express: Earn 3 percent cash back on the first $50,000 spent in the category of your choice from a list of eight, including advertising purchases in select media
When comparing cards, consider your redemption options.
The Chase Ink Business Preferred and Business Gold Rewards Card both offer multiple ways to redeem, including travel, but you might prefer the simplicity of redeeming cash back as a statement credit instead.
Expand your rewards scope to include other online business expenses
Digital marketing and web hosting may be your biggest costs, but your online business budget might also include:
- Computer hardware and software.
- Website and logo design.
- Home office supplies.
- Coaching or consulting fees if you’ve hired a business coach.
- Internet, cellphone and utility services.
- Inventory or materials if you sell a physical product.
- Listing fees if you sell on a third-party site (such as Fulfillment by Amazon, eBay or Etsy).
- Credit card processing fees.
- Business card printing fees.
- Accounting software.
- Professional development (think webinars or online business courses).
Chances are even if you’re a freelance writer whose home office consists of your laptop and sofa, you have at least a couple of these expenses each month. As you look for a rewards card, keep spending in perspective.
“If your spending is modest, you may want to choose a card with a low or no annual fee,” says Detweiler. “If you’ll be charging significant amounts, consider a card that offers higher rewards, and weigh what you’ll earn against the annual fee.”
What to look for in a business card beyond rewards
Seymour says if you’re running an online business from home to only consider travel cards if you frequently attend industry conferences or trade shows. Otherwise, cash back or points may be the better rewards choice.
- A flat-rate cash back card, such as Capital One Spark Cash for Business, could be a good choice if you’d rather not worry about managing different spending categories. This card offers unlimited 2 percent cash back on every purchase.
- Pay attention to whether you’re choosing a credit card or a charge card. Charge cards, such as the Business Green Rewards Card from American Express OPEN, can still help you earn rewards, but you don’t get the benefit of being able to carry a balance.
One of the pitfalls of running an online business from home is that your income may not be consistent from month to month. A credit card would give you the option of being able to carry a balance from time to time.
Finding the right card “really comes down to what you’re getting rewards for and what structure best aligns with your business,” says Seymour. “It sometimes helps to have a few different cards for different types of purchases, since point structures can vary depending on the card.”
Just don’t go overboard when applying for business credit cards, as that could ding your personal credit score with multiple hard inquiries of your credit.
Increase rewards for your home-based business by stacking
Rewards stacking simply means earning cash back or points on your business purchases on top of what you’re getting with your rewards card.
It’s possible to multiply rewards on just about everything you spend when running a business from home.
You can do that by using your card when you shop through coupon and cash back portals or apps online. Some of the most popular stacking tools include:
See related: How to stack rewards to save big on purchases
Loyalty programs, card-linked offers (meaning a discount that’s linked directly to your credit card) and your card’s online deals portal are additional ways to stack rewards.
- If you have an American Express business card, for instance, you can check out deals through Amex Offers.
- You can earn bonus rewards when you shop selected merchants, such as Best Buy, which is good if you need to buy a new laptop or hard drive.
You can also save money by signing up for business discount programs.
- Mastercard Easy Savings and Visa SavingsEdge are free to join.
- You link your eligible Mastercard or Visa business credit card and you can earn rebates automatically when you shop partner merchants.
- For example, in September you could have saved 5 percent on Bing ads, Mailchimp email services and web hosting with HostGator through SavingsEdge.
As you stack rewards, keep track of spending. Those extra points or cash rewards may lose some of their value if you’re carrying a balance and paying interest each month.
“Don’t think of it as free money,” says Halliday. “It’s not and the card needs to be paid off immediately to really get the benefits.”
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