One of the benefits of having a business credit card is the myriad of rewards programs offered by credit companies. A rewards program is an incentive to use your card, although there are a few things to think about before applying for one. First, is your company going to pay off the credit balance in full each month? And second, what regular services or products does your company use most often?
If the answer to the first question is no, then forget about rewards programs. The interest rate, or APR, you’ll be paying for keeping a balance will offset any reward savings. Now, there are quite a few cards that offer a 0% interest rate for the first year or so. If you think you can keep a debt during the first year and then pay it off before that APR kicks in, this could be an option as well. The point is, if there is any chance you’ll be spending money on credit card interest rate for keeping a debt, then ignore rewards programs and just find a card with the lowest possible APR you can. If, however, you can pay that balance off every month, there lies a potential bonanza in savings through rewards programs.
Here’s why: the credit companies want you to use your card, so they give you incentive to do so by offering reward programs; however, they are banking on the chance that you will begin to keep a debt on your card and begin to pay interest to them; this is how they make their money.
Rewards programs are analogous to “loss leaders” in a retail store: offering cheap goods at a loss in hopes you’ll buy something else so they can make a profit.
By not carrying a debt on your card and hence not paying the APR, but still taking the rewards, you are in a sense “ripping off” the credit companies. Not really because it is their decision to offer it, and they make plenty off of others who carry a debt and pay the interest. This is definitely something you can take advantage of. If you do, there are several rewards choices for your business, and I highly recommend you make a careful decision based on your business needs.
For instance, do you travel a lot in your business? Did you know that several credit card companies have teamed up with certain airlines to give you frequent flyer miles?
Again, as long as you pay off the balance every month, you can save a bundle.
How about dining? Do you regularly take clients out for dinner? Several credit cards offer up to 20% savings on restaurants. If you pay your balance off.
Are there services your business regularly uses? How about FedEx, or Gateway Computers? Did you know there’s a card that offers 5% to 20% savings on a plethora of commonly used services and products? If you pay your balance off.
The rewards are there to make you use your card, and the credit companies cross their fingers they’ll get to charge you the APR. Using the system in a way that it wasn’t “meant” to be used by the credit companies can result in savings for you and your business. And be sure to scour the credit card offers for reward programs that make sense for you.