By playing your cards rights, a business card can rack up rewards fast
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If you run a small business or even a side hustle, signing up for a business credit card can help you supercharge your rewards earnings. In order to reap the big benefits, you’ve got to know how to play the game right.
It’s becoming more common for qualifying consumers to apply for both business and consumer cards as part of a rewards earning strategy, says Shawn Coomer, managing editor of Miles to Memories, a blog at BoardingArea.com that helps consumers navigate rewards travel.
“You can sort of double dip and rack up really big rewards,” Coomer says.
For example, entrepreneur Rachel Mullen, who co-owns Music City Suds, a soap-making company in Nashville, Tennessee, pays for all of her business expenses, from soap-making supplies to trade show booths to utilities, with one of her four small-business credit cards.
By choosing business cards that work in tandem with her consumer credit cards, she racks up at least twice as many points in her targeted programs, and she redeems these points for travel.
Can you get a business credit card?
While you typically need to have a business to qualify for a business rewards credit card, even a microbusiness may count.
For example, if you sell antiques on eBay, run a craft shop on Etsy or mow lawns in your neighborhood, you may be able to qualify for a small-business credit card, says Rosemarie Clancy, vice president of content and marketing at RewardExpert, a service that helps consumers maximize their rewards.
You can apply for a business credit card as a sole proprietor using just your Social Security number; you don’t need an Employer Identification Number from the IRS, Clancy says. “The good news is, you don’t need a full-blown company,” she says.
The card issuer may ask for the name of your business and its annual revenue, and the issuer will check your personal credit to assist it in making a credit decision, Coomer says.
Most business credit cards, especially those with big sign-up bonuses, require good to excellent credit. There are a few exceptions. For example, the Capital One Spark Classic for Business is open to applicants with fair credit, and the Wells Fargo Business Secured Card is open to consumers with poor credit, with a credit line based on the amount you deposit. These cards offer no sign-up bonus and only modest rewards of 1 percent cash back.
Also, some issuers will want to see an established business with a history of revenue, but others will issue a business credit card to a fledgling startup, he says.
However, it’s important to be honest on your application about the size of your business. “If you make $200 a month mowing lawns, don’t say you make $20,000,” he says. “Tell the truth, and let the bank decide.”
How business cards can boost your rewards
There’s an array of business rewards cards to choose from, and many credit card issuers offer business versions of their consumer cards.
Business credit cards can act as a tool to help you keep your business and personal spending separate, track your business expenses and help you accrue rewards more quickly.
There are two main ways a business card can rev up your rewards:
- Business cards multiply your sign-up bonus options. Being eligible to get small business cards opens more opportunities to earn big sign-up bonuses. Many business rewards cards offer sign-up bonuses that equal or exceed the bonuses on the equivalent consumer cards from the same issuer, Coomer says. However, the minimum spend, the amount you have to spend in a certain time frame after opening the account to get the bonus, may also be higher on business cards.The extra sign-up bonuses can propel you toward additional rewards. For example, the Southwest Airlines RapidRewards consumer and business cards each offer 50,000 bonus points for spending $2,000 in the first three months. Get both cards and you need to earn only 10,000 more points (a total of 110,000) to snag a Southwest Companion Pass, which lets you bring a guest for free every time you fly for the remainder of the year in which you earn the pass plus through the next full calendar year. That’s one example of how adding a business card to your rewards mix can be “very lucrative,” Clancy says.
- Business cards help you earn more for your spending. In general, business cards offer more points-earning power than consumer cards in categories where businesses tend to spend. Across all rewards cards, the baseline earning tends to be 1 point per $1 spent, Clancy says.Some consumer cards do offer 2 points per $1 in certain categories, such as travel, or as much as 5 points per $1 in rotating categories. However, consumer cardholders may have to sign up to earn the larger number of points, and there’s usually a low cap on dollar spending eligible for the higher point threshold. For example, the Chase Freedom card, a consumer card that offers 5 points per dollar in categories that change every three months, requires you to enroll each quarter and caps your bonus earnings at $1,500 per quarter.However, the caps on earnings on business cards are usually much higher. For example, the Chase Ink Plus business credit card offers 5 points per dollar for the first $50,000 per year spent on office supplies, internet, phone and TV services. And the Bank of America WorldPoints Travel Rewards Business Visa credit card offers 3 points per dollar spent on travel with no limits, plus 1.5 points per dollar spent in other categories. The equivalent Bank of America consumer travel card offers just 1.5 points per $1 in all categories.You also may earn monthly bonuses based on your spending. For example, the Wells Fargo Business Platinum Credit Card offers 1,000 bonus points for each billing period in which your company spends $1,000 or more on the card.
If you’re going to apply for a business card, it’s smart to do some work ahead of time to make sure that it is a good fit for your business, that it offers the perks you want and that it also meshes well with your consumer rewards cards.
For example, Mullen uses both a business and a consumer card from Chase because both earn Chase Ultimate Rewards points, which funnel into the same big pot of rewards, she says.
That type of strategizing will make your rewards go further than if you had the same amount of points spread out over many different programs, Clancy says.
Pitfalls of business credit cards
Business cards do have a few downsides, both in general and as rewards tools. It’s important to consider the minuses before applying.
First, business cards are not covered under the Credit CARD Act of 2009, which protects consumers by forbidding excessive fees and surprise interest rate hikes that apply retroactively to purchases already made. In theory, the ability to change terms suddenly could cost you, possibly canceling out your rewards.
But if you use your card responsibly, pay your bill in full and practice good bookkeeping habits in your business, that shouldn’t be a problem for you, Clancy says. “You’re not as protected as you would be with a consumer credit card, but you may not need the protection as much,” she says.
Second, the lure of rewards may tempt you to mingle your business and personal spending, a bad business practice that business cards are supposed to help you avoid.
An example of that could be the owner of a startup with low overhead who may not do enough business spending to meet the minimum spend for a juicy sign-up bonus. In that case, the owner might put personal spending on the card in the first few months after opening the account just to get that bonus, says Warren Cohn, who uses business rewards cards for his New York consulting and public relations firm.
And a business owner with a card that earns 5 points per $1 for telecom spending might be enticed into paying personal cellphone and cable bills with a business card. “The temptation to combine business and personal spending is there,” Cohn says. “But it’s definitely a bad idea.”
Also, business rewards cards can cost you. Like consumer rewards cards, business rewards cards generally tend to have higher interest rates than cards that don’t offer points or miles. So business owners who need to use a card for short-term financing may want to look for a lower-interest option. And business rewards cards tend to have hefty annual fees, from under $100 to $450 or more.
“You really have to consider what kind of value and benefit you are getting from the card,” Clancy says.