When determining which cash back credit card will work best for your small business, it is important to first understand how the cash back rewards program works for each card. Creating a simple spreadsheet will allow you to record all of the important data points for each card, and then evaluate these data points to determine which card will work best for your small business. You will need the following data points to make an informed decision: fees, interest rate, percentage of cash back, limit on cash back, disbursement method, and cash back categories.
First, you need to evaluate what the fees are to participate in the cash back rewards program. Many small business credit cards charge a mandatory membership fee that may negate any cash back savings you accumulate. For example, if your membership fee is $500 per year, then you will need to accumulate more than $500 in cash back savings to simply break even. This fee can quickly eat into any cash back benefits you receive.
The interest rate is also a very important consideration when evaluating cash back credit cards. It is recommended, that to take advantage of the cash back rewards program the small business should pay off the balance each month. this way they would not be charged any interest rate and receive full cash back benefit for using their card. The cash back percentage of a card is typically the best selling point. For example, many small business cards offer 1% cash back on every purchase and increased categories based on seasonal spending and the frequency of purchases. Again, it is advisable to research your spending patterns to evaluate which cash back card will give you the most value.
Many cards do impose a certain limit on your cash back value. For example, if you make over $1 million in purchases each year, you may be restricted to only receiving a limit of $1000 in cash back rewards. Not every card has this limit however, so it is important to explore the limits on the card in your decision process. The disbursement method for your cash back is also a critical component of your decision. Many cash back credit cards will only give you a credit towards a future bill, while some will give you a pre-loaded gift card. The most flexible disbursement option is to receive a physical check, but not every card will offer that as an option.
Finally, the last data point is the varying cash back categories available on your card. These could range from gas stations, to movie theaters, to restaurants. Most cards offer a different cash back percentage for the varying spending categories. It is important to ensure your card has spending categories you will actually use