Should you spend your business card rewards on the company or on yourself?

They’re yours to use as you wish, but is it a good idea? Experts weigh in


If you’re a small business owner with a business rewards card in your wallet, you can reinvest the rewards in your business or spend that big pile of points on numero uno. Whichever route you go, weigh the pros and cons of each.

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If you’re a small business owner with a business rewards card in your wallet, you have a choice: reinvest the rewards in your business or spend that big pile of points on numero uno.

You could use your business rewards to fly to a conference in Chicago, or you could cough up the cash to fund that trip (while reaping the tax deduction) and stockpile your miles for a beach vacation in the Bahamas.

Whichever route you go, it’s smart to weigh the pros and cons of each option and make a careful decision. Thinking through the best way to use your business rewards can help you get the most out of your business spending, prevent tax snafus and avoid fights over divvying points with a business partner.

Option No. 1: Reinvesting rewards into the business

Plowing all your business card rewards right back into your company may be your best bet if you prefer to do everything by the book.

“It’s a very solid business practice for business credit card points to be reinvested back into the business,” says CPA Ravi Ramnarain, who works with entrepreneurs and small businesses.

Handling business rewards this way has several big advantages over spending business rewards on personal perks because it allows you to:

  • Keep business and personal spending separate. Most small business owners know they should avoid mixing business and personal money. This best practice lets you keep tax records neat, avoid audit disasters and possibly protect your personal assets if you get sued. It’s best to avoid personal use of business rewards as well, says Justin Goodbread, a business strategist and certified financial planner. “The business should stay completely separate from the personal,” he says.
  • Avoid spats over points with business partners. If you’re the sole owner of the business, no one can object to your taking all the rewards to go on a luxury cruise, winery tour or jungle safari. But if two or more business owners are involved, trying to divvy up rewards for personal use can get dicey. That’s why Matthew Ross, co-owner and COO of the sleep and mattress review site The Slumber Yard, and his partner, decided to spend the rewards on gift cards to hand out as employee bonuses. “If it were just me, I’d probably take some of the rewards for myself,” Ross says. “But we didn’t want to get into splitting rewards.”
  • Use rewards to give your business a boost. Your rewards can fund some of your company operations or help to pay down business debt, says Michael Cetera, senior credit analyst for FitSmallBusiness, a digital resource for small businesses. For example, Cetera points to one small business owner who uses credit card rewards to fund employee health insurance. “That’s certainly one way to put money back into your company and make it more attractive for employees to work there,” he says.

However, it may be best not to count on your points, miles or cash back for essential business expenditures unless your business spending is very consistent, Cetera says.

“Consider it gravy, not something to rely on to fund business operations,” he says.

Option No. 2: Pampering yourself with business card rewards

If you’re the only owner of the company, you might be tempted to keep the rewards and use them on a personal perk, such as treating yourself to a spa day, vacation or special gift.

“The rewards are yours to spend, and you should be using them in whatever way you see fit,” says Cetera, adding that he knows of “a ton” of business owners who spend business rewards on themselves.

Small business owner Casey Ames recently used his business rewards to set off on a backpacking trip to South America with his fiancé. As the active partner in Harkla, a Seattle-based company that offers products for families raising kids with special needs, he has an agreement with his partner that allows him to keep all the points.

“Business travel can be deducted, so it makes more sense to pay for business travel and use the miles for personal use,” Ames says.

If you go this route, you don’t need to worry about running afoul of the taxman. Using your business rewards on personal stuff shouldn’t cause you any problems at tax time, says federally licensed tax professional Abby Eisenkraft.

“It’s really not an issue with the IRS at all,” she says.

However, financial professionals who are adamantly in favor of keeping business and personal spending separate say it’s still best to use the rewards for the business expenses and look for other ways to get tax breaks, such as hiring your kids or renting part of your home to your business.

“There are so many other ways you can reduce your tax bill,” Goodbread says.

Tips for spending business rewards wisely

Do you lack a plan for spending the points, miles or cash back you rack up on your business credit card? Here are four ways to make the most of your business rewards spending:

Create a plan for using business rewards

Tally up the rewards you expect to earn from your business spending each year and consider how to use them to your best advantage.

“Much like consumers, small business owners tend to think of credit card rewards as an afterthought,” Cetera says.

Taking the time to make a purposeful plan instead can allow you to reap maximum benefits. For example, using rewards to get merchandise rather than gift cards to give your employees for a job well done may allow you to avoid having to report a gift as income for your employees. The IRS says you may skip reporting some low-value gifts like flowers or fruit baskets but not cash or “cash equivalents” like gift cards.

Get creative to make the most of business rewards

If you decide to use rewards to boost your business, look to other business owners for cool ideas. For example, the clothing startup Betabrand uses rewards to send employees on dream vacations to places like Iceland, Morocco and Japan.

Because you can’t put a price on employee loyalty and goodwill, many business owners choose to use points and miles to reward workers. For example, Ross gives Whole Foods gift cards to foodies, Nike gift cards to fitness buffs and Uber gift cards to travelers.

“There are 100 different options, so you can tailor it to each employee,” he says.

Talk about points with a tax professional

It’s always a good idea to sit down with your accountant or tax professional to discuss your plan for how to earn and spend points, miles or cash back in your business. Be aware that there may be tax implications for some kinds of rewards.

For example, if you make business purchases with a card that offers 2% cash back, you can’t deduct the full cost of the item because the IRS considers the cash back a post-purchase discount, Ramnarain says. If you make a $100 business purchase on a card that offers 2% cash back, you can deduct only $98, he says.

Get on the same page with your partner

If you have a business partner, it’s smart to create a section on business credit cards in your operating agreement. Include info on which cards each person has, who is responsible for making payments and how rewards will be spent, Cetera recommends.

“You’ve got to spell everything out, so there are no problems,” Eisenkraft says.

Bottom line

Now that you know the pros and cons of spending business rewards on your business versus yourself, it should be a snap to decide whether to reinvest in your company  – or snag yourself a well-deserved reward for your hard work.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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