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A business credit card can offer flexibility and boost your spending power, if used correctly. And if it can earn you a few pounds along the way, well, you’re not going to say no, are you?
There’s a range, albeit limited, of cashback business credit cards on the market that can do just that. These cards tend to have fairly strict eligibility requirements and may come with an annual fee attached.
Many also come with high interest rates, so if you’re likely to carry an outstanding balance on the card from month to month, you’d probably be better off focusing on business cards offering the lowest rates. That’s because a cheaper card is likely to save you more than you’d earn in cashback.
But, if your company puts a significant amount on plastic and tends to pay off the card bill in full each month, then one of the cashback deals above could offer a return that’s not to be sniffed at. Business cashback credit cards will pay you a percentage of whatever you spend (aka the card’s “earn-rate”) back into your account. The cashback will be transferred automatically, either monthly, quarterly or annually, depending on the card.
Some credit cards place a cap on the amount of cashback you can earn. Others will only pay cashback when you make purchases with specific retailers. And some offer additional cashback as a welcome bonus for new customers.
If a number of employees are set up as additional cardholders, you (not they) will stand to earn cashback on all their spend too… and it’s up to you whether you tell them! While this probably sounds like a great deal, if you’re paying an annual/monthly fee for each cardholder, it may not be.
Cashback isn’t seen as income for tax purposes. Rather, it’s seen as a discount, so you don’t need to worry about declaring it.
Look out for introductory “welcome” bonuses or enhanced earn-rates (especially if you’re about to shell out on something), but equally, beware of transactions that aren’t eligible, like cash advances (when you withdraw cash using a credit card).
Be aware that some cashback business credit cards might require you to have an existing banking relationship with the lender or have a good business credit history to get accepted. If you don’t have much of a credit history, you might need to sign a personal guarantee, stating you will be personally liable for repaying the debt if your business is unable to.”
Get acquainted with the terms of your credit card so you know what purchases will allow you to earn cashback, then complete as many of your business purchases with your cashback credit card as possible.
However, don’t fall into the trap of making unnecessary purchases just to chase the cashback. It’s also important not to overspend to the point where you can’t afford to repay your credit card bill at the end of the month. Any interest incurred as a result of doing this is likely to eclipse the cashback earned.
This is pretty cut and dried. You should try to work out what the card will cost you and what it will earn you.
Once you’ve estimated how much your company would spend on the card each month, the first two features you should check are the cashback earn-rate and the annual fee (if there is one). Calculate how much cashback you’re likely to earn per year using our tool below, then subtract the annual fee to get an idea of your annual earnings. If the annual fee eclipses the amount of cashback you’re likely to earn, you’re best off applying for a different card with a lower fee.
It’s highly recommended to pay off your balance in full every month to avoid paying interest. If you’re not planning on doing that, you should compare the interest rate and credit limit on each card to ensure you get a good deal. It’s rare for cashback credit cards to have introductory 0% interest deals attached, but if they do you should make the most of these.
The main alternative is credit cards that offer reward schemes that allow you to earn air miles or points that can be exchanged for retail vouchers. If these rewards are available with retailers that you’d spend money with anyway, these cards might be a better option.
You could also look for a business bank account that lets you earn cashback or rewards on your debit card spending, particularly if you’re worried about paying interest on your balance. Debit cards automatically deduct the amount spent from your bank account, so you’ll never carry a balance from month to month.
If your business is big on spending on plastic and good at keeping on top of repayments, a company cashback credit card could be a great option to get more bang for your buck. But, as always, it’s important to shop around for the best cashback deal for your business. Some cards come with a minimum spend or annual fees. And if you don’t repay your balance on time and in full, the interest you will incur might outweigh the cashback you earn.
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