Are you an established startup founder, CEO of a treasury, or a budding entrepreneur venturing into a new side hustle? They all have one thing in common, that is maintaining and monitoring the decent financial health of their respective organizations. Doing this involves:
- Keeping a regular check on the optimization of working capital.
- Tracking income and expenses.
- Reducing costs.
- Maximizing the credit benefits.
If you are already subscribed to a commercial card program, then you are already on the right track because it is the key to the door of multiple benefits for your business.
Apart from providing robust financial controls, seamless management of transactions, and improved working capital management, these cards offer redeemable rewards and cashback across a range of categories. But what you earn in the form of points, miles, or cash back largely depends on your business model, types of expenses, and long-term financial goals.
Want to explore some ways in which you can utilize these business credit cards to earn some of the earned cash that you invested in your business via using these. Sounds confusing? Let’s break it down for you.
The pressing concern among entrepreneurs is how to choose a card that rewards abundantly. Before we jump to short-listing the credit card for our business, we must bear in mind that it doesn’t come in the form of a “one-size-fits-all.” We need to have our priorities well defined before we equip ourselves with any of these financial tools, and we need to consider the following factors for doing so.
- Type of rewards & perks: If you do not travel a lot for business purposes, then air miles or lounge access won’t be much help for you, and in this case, you will prefer to receive cashback in the form of redeemable reward points or maybe gift vouchers and discount coupons that you can encash for your next business purchase. So, the key is choosing a card that provides benefits aligning with your expense type and financial goals, such as service memberships, shopping protection, etc.
- Introductory bonus: Some credit card companies offer schemes where if we splurge a certain amount in the initial month of card subscription, then we receive a bumper amount of miles and cashback of as much as $300. What we need to ensure is that we don’t tweak our spending patterns just to become eligible for this introductory discount. Still, for business expenses that cross this benchmark genuinely, it is a huge monetary gain for the organization.
- Annual costs and interest: Knowing the APR is crucial for any business in advance if you are planning not to clear your balance in full for each month. As a percentage of the outstanding balance, APR includes interest rates and fees, and knowing this helps in strategizing ways in which maximum rewards can be earned back from these cards. Some premium cards offer an array of discount perks in exchange for a lofty annual fee, but we should only subscribe to them if we are planning to use all the beneficial features provided by them. Otherwise, it is a waste of our funds.
Can we use business card benefits for personal use?
Of course! We can because we don’t want to reinvest the cashback we earn into our business, and sometimes, we want to splurge those precious card points for sponsoring our dream vacation or making the most awaited purchase of any luxury item. Since these rewards are not taxable, we need not worry about any tax implications. In case the business is run in partnership among two or more parties, there needs to be a mutual agreement that defines the clause regarding the usage of these business cards and the sharing of points, miles, or cash back to avoid future conflicts.
Ways to manage your rewards effectively:-
- Analyze your spending pattern: Reviewing your bank statements will help you figure out areas where you tend to spend most of your money. Knowing this will help you leverage the right credit cards efficiently to gain maximum rewards.
- Weigh the benefits: Learn to optimize flat-rate reward cards and tiered rewards cards according to your preference. A flat rate works well if you wish to receive simple predetermined cash back on all purchases, which may be 2% or 3%. Whereas if you want to earn bonus categories with varying interests from 1%-3% for different types of purchases, then a tiered card is your go-to tool.
Hence, these credit cards are much more than just an instant financing option. They serve as a stepping stone to a robust business organization with a seamless financial infrastructure. Therefore, doing the right amount of research for implementing a business credit card that aligns with your objectives and goals is paramount for future success.