Why Your Small Business Should Use a Cash-Back Card
If you're not getting rewarded for every dollar you spend, you're doing it wrong
Unless you’re running the next big tech startup, chances are venture capital is not pouring in your doors. And like many entrepreneurs and small business owners, you will need to bootstrap your way to success.
So how can a startup or small business finance and scale their business fast? The answer lies in credit cards. But not just any card. Selecting the right type of card for your business can mean a world of difference. And then, of course, you need to use it wisely.
Whether you have a good year or miss your revenue goals, all entrepreneurs and small business owners want to boost their bottom line. One simple way to do this is by changing the payment method you use for business expenditures.
Choosing a credit card that earns rewards is essential for scaling startups and small businesses. Selecting a card with cashback or other rewards can add to your bottom line as you invest in your company. It is literally a way you can “spend money to make money."
How a credit card can help your business
As a consumer, you are likely aware of the many options for cash-back and rewards credit cards on the market today. Companies like Capital One, American Express, and others aggressively advertise on TV, via mailers and other media.
You might see these advertisements and recognize the value of a cash-back credit card. You might even use one in your personal life. Many entrepreneurs and small business owners, however, do not connect the benefits of a cash-back card to their business.
Cash-back credit cards for businesses pay you back a percentage of the money you spend on business-related expenses. This includes expenditures on supplies for the office, gas and accommodations for business-related travel, vendor services and more. This is money that goes straight to your bottom line without requiring extra work or expenditures on your part.
Other rewards credit cards like points or travel cards provide flexible rewards that can be transferred to a number of other programs to suit their needs. Recouping money from a rewards card directly offsets a portion of the money you spend on your business.
What to look for in a cash-back/rewards credit card for your business
Entrepreneurs have a number of choices for credit cards with rewards programs that are specially designed for business owners. When considering a cash-back credit card, evaluate the following:
Cash-back rate: How much money you are awarded for your business spending is not just a question of more. Although you want to maximize your cash back, it is also important to assess the other features of the card before you apply.
Minimum purchases: Some programs require you to spend a minimum amount of money before you are eligible for cash back. For entrepreneurs and small business owners with a high volume of business expenses, this is generally not an issue. However, if the monthly minimum is higher than what you typically spend, it may be best to look for a different card.
Spending categories: The awards on purchases vary by cash-back program. Some cash-back cards provide full reimbursement on any expenses related to your business, while others offer varying levels of cash back for different types of purchases. Be aware of the different levels of cash back when you sign up for a credit card and carefully review the terms and conditions so you are not confused by your rewards.
Cap-on rewards: The majority of programs offer cash back on all eligible purchases with no spending limit. However, some cards only provide the maximum cash back on purchases up to a certain amount of spending. Once you exceed this amount, your benefits are reduced. If you spend a lot on your business, you will want to make sure that your cash back is not subject to a cap.
Bonuses: The attraction of cash-back credit cards is not limited to the extra money you earn on purchases. Programs vary in their incentives, but you may be able to take advantage of bonus cash after your spending reaches a certain level, $0 annual fees and more.
As with any credit card, it is also important to budget for annual fees, APR and other costs. Cash-back programs can help defray some of the expenses associated with the card, but you want to be aware of fees and interest rates that offset the money added to your bottom line.
Best small business credit cards in Canada – our top 3
If you were debating on which business credit card would be the best fit for your business, look no further. We’ve looked at the benefits of each and come up with the best small business rewards credit cards that could fit any business’s needs.
Let’s take a closer look at what these business credit cards have to offer:
Best no fee small business card:
BMO CashBack® Business Mastercard®*
AT A GLANCE
Get cash back on all your day-to-day business spending like cell phone, internet and office supplies, with the BMO CashBack Business Mastercard.
Rewards rate: From 0.75-10%
Our credit estimate: Good (660-725)
Welcome bonus: up to $102*
Annual fee: $0
Interest: 19.99% on purchases, 22.99% on cash*
This card is great for you if you are a small business owner who is:
just starting out and doesn’t want to pay any extra expenses (like annual fees)
won’t be spending enough in order for the rewards and benefits to outweigh the cost, or…
looking for a no fee Mastercard or Visa to pair with a Business American Express, so you can be sure to earn rewards no matter where you shop
Whatever the case, a no fee, cash-back credit card could bring some value to your business.
And in our opinion, the best option in that case is the BMO CashBack® Business Mastercard®*.
This card will give you:
10% cash back on all your gas, office supplies, and cell phone and internet bills for the first 3 months (up to $150 earned) and then 1.5% after the first 3 months,
1.75% cash back on all purchases at participating Shell locations, and
0.75% cash back on all other purchases.
So if you’re looking for a no fee, cashback business credit card, and some of your biggest expenses are gas, office supplies, cell phone, and the internet, it’s hard to go wrong with this BMO business credit card.
It also comes with extended warranty and purchase protection to give you peace of mind when making purchases for your business – which is pretty standard for a no fee card.
Best RBC business credit card:
RBC Avion Visa Infinite Business:
AT A GLANCE
Earn RBC Rewards on all your business purchases with the RBC Avion Visa Infinite Business card. Plus get top-notch insurance and premium perks on the side.
Rewards rate: around 2.91%
Our credit estimate: Good (660-725)
Welcome bonus: up to 25,000 bonus points*
Annual fee: $175
Interest: 19.99% on purchases, 22.99% on cash*
RBC is one of (if not) the biggest banks in Canada – which means there’s a decent chance you already do some banking with them. And if that’s the case, it could be extra convenient to look into RBC business credit cards.
And the good news is the RBC Avion Visa Infinite Business is one of the best business credit cards Canada has to offer – so you won’t be making any sacrifices.
Let’s start with the points. Once your account is approved for this card, you’ll get the full 25,000 point welcome bonus. And on everything else, you’ll get:
1.25 points per $1 spent on the first $75,000 in annual purchases
1 point per $1 spent afterwards
These are pretty good rates, but what are your points actually worth?
Since you’ll be earning RBC Rewards with an Avion card, you’ll get some extra redemption options to make your points even more valuable and flexible.
Here’s an overview of your main options to redeem:
Air Travel Redemption chart – 2.33 cents
Transfer to select airline partners – 1.75 cents
Transfer to WestJet – 1 cent
Transfer to Hudson’s Bay – 1 cent
Redeem for any travel through RBC – 1 cent
That means if you maximize your redemptions, you could get up to 3% return on your purchases. This is quite the competitive earn rate.
But that’s not all this card has up its sleeve. You’ll also get 12 types of insurance:
Best travel rewards business credit card:
Marriott Bonvoy™ Business American Express Card
AT A GLANCE
The Marriott Bonvoy Business American Express Card gives small business owners flexible rewards that can be transferred to a number of other programs to suit their needs.
Rewards rate: around 2.09%
Our credit estimate: Very Good (725-760)
Welcome bonus: up to 50,000 bonus points*
Annual fee: $150
Interest: 19.99% on purchases, 21.99% on cash*
If you’re looking for a card that has a higher return on spending, a better insurance package, and some extremely valuable benefits, then consider a premium business travel card.
And if you want the best, the Marriott Bonvoy™ Business American Express Card comes out on top for us.
Although the annual fee is a little higher for the primary and secondary cardholders ($150 and $50 respectively), this card makes up for it with all its features:
5 points per $1 spent at Marriott properties,
3 points per $1 spent on gas, dining, and travel,
2 points per $1 spent on all other purchases,
an annual free night certificate for a stay worth up to 35,000 points, and
15 Elite Night credits every year you have the card.
The free night alone more than covers the annual fee – the other Marriott perks just makes this card even better.
And then there’s these to sweeten the deal:
a 50,000 point welcome bonus after spending $1,500 in the first 3 months, and
9 different types of purchase and travel insurance.
4 advantages of small business credit cards
There are a number of benefits that you can get from small business credit cards that you may not expect.
1. Keep your business expenses straight
With the right business credit cards in your wallet, your business expenses are clearly separated from your personal expenses.
Having a card that’s set aside just for business purchases makes it easy to track your business spending on day-to-day purchases.
2. Free up some (sorely needed) cash flow
By using a credit card to make day-to-day purchases, you won’t have to worry about cash flow quite as much.
You’ll still want to make sure that you have enough cash on hand to cover your credit card bill every month, of course, so don’t use your credit card for spending outside your budget.
3. Provides security and convenience
Credit cards are a much more secure way to keep track of the purchases your employees are making, and you have the added convenience of getting all of these recorded in a single location. No more running around collecting receipts or messing around with petty cash.
4. Earn valuable rewards
If you’re going to be making purchases or managing expenses for your business, why not earn some rewards in the process? You could even use those rewards as employee incentives, or use them to help further your business.
Either way, a small business credit card can help you put your business purchases to work for you.
Adding it all up
Many entrepreneurs have maxed out credit cards and have even gone into debt to get a business off the ground (not recommended!). Given the expenses associated with starting and running a small business, credit cards can seem like both an essential ally and — when the balances are high — an implacable adversary.
Cash-back credit cards enable entrepreneurs and small business owners to invest in the company while getting something back. The rewards may seem small in terms of percentages, but the money you are reimbursed on purchases can add up to a large chunk of change.
Ultimately, businesses with a lot of purchases can add hundreds of thousands of dollars to the bottom line without having to work harder or hire more people. Just make sure to make your payments on time to avoid racking up unnecessary interest!
What’s Small-Books?
We're a cloud-based (remote) bookkeeping service powered by real humans. Small-Books provides you with a dedicated bookkeeper to partner with, who is a knowledgeable small business expert. We’re here to take the guesswork out of running your own business—for good.
Your bookkeeper will import your bank statements, perform bank reconciliations, categorizes transactions, and prepares financial statements for you every month. We help reduce errors (read: headaches) and give you more time to focus on your business rather than your bookkeeping!
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Small-Books assumes no liability for actions taken in reliance upon the information contained herein.
