Should I Get a Cash Back Business Credit Card?

By Megan Doyle | American Express^® Freelance Contributor
6 Min Read | March 25, 2021

Summary

Are Cash Back Business Credit Cards Worth It?

Generally speaking, cash back credit cards are often worth it because they help you earn a little extra money every time you use that card for an eligible business transaction. However, it’s not always that simple. Whether cash back business credit cards are truly worth it depends on your business needs.

For example, if your business expenses include a lot of travel and restaurant spending, you may be better off with a points card that helps you earn rewards for airfare, hotel stays, and dining. Still, business isn’t all about travel – cash back cards can offer lucrative simplicity by providing a straightforward way to earn back around 1.5% to 2% on your business transactions – and sometimes more depending on the card and the spending category.

Is Cash Back on a Business Credit Card Taxable?

Is credit card cash back taxable? No, in most cases, credit card cash-back rewards are treated as a rebate or discount and not as income. However, in some rare cases, you may be required to report your rewards as income. For instance, if you receive bonus for signing up for a credit card, with no minimum spending requirement, then that bonus may be taxable. If it is, you’ll receive a Form 1099-INT or Form 1099-MISC in the mail and will want to report that as income on your tax return.

Why Get a Cash Back Business Credit Card?

All business credit cards offer the benefits of helping to build business credit history while improving cash flow options. But there are a few main reasons why a business may want to specifically opt for a cash back business credit card:

Get rewarded for regular expenses.

Cash back business credit cards enable a business to earn cash back on the purchases it’s already making, such as internet and utility payments, office supplies, replacement furniture or equipment, lunch meetings, transit costs, and more. If you can avoid accruing interest by paying off the statement balance in full and on time, the full value of cash back rewards can accrue to the business’ bottom line.

Cash back rewards can add up quickly.

Given a business with high expenses, cash back can really add up. Consider a restaurant that spends $4,000 a month on food inventory. If they pay suppliers with a cash back credit card that has a 2% flat rate, they can earn $80 cash back a month. That’s nearly $1,000 a year back for purchases they’d already be making.

Cash back business credit cards offer simplicity.

While points cards can be lucrative in their own right, it can take time and effort to find the most cost-effective way to redeem points since redemption methods and values aren’t static like cash back. Cash back, on the other hand, automatically accrues with every eligible purchase so you can reinvest those funds into your business – especially if the card issuer automatically applies cash back as a monthly statement credit.

Cash back business cards can help you round out your rewards-earning potential.

Cash back business cards can be useful even if you also have a points card. For example, a cash back card can help your business get the most out of ordinary bills and business expenses, while a travel-focused points rewards card can help you enjoy travel perks and benefits like airport lounge access – all while earning points that can be redeemed for airfare or hotel stays. Just remember that credit cards are only ever worth it if you can stay on top of your payments, avoid interest, and afford any annual fees.

Which Cash Back Business Credit Card Should I Get?

There’s no simple answer to which cash back business credit card you should get. It depends on what you’re looking for in a business credit card. Here are a few important factors to consider:

Type of cash back card. There are two main types of cash back business credit cards:

• Flat rate cards earn a set percentage of cash back for each eligible purchase, usually around 1.5% to 2%. Some flat rate cards reward card members for paying balances early. For example, one cash back business credit card lets you earn an unlimited flat rate of 1.5%, but only on the portion of your balance paid within 10 days of your statement closing date.
• Tiered cards offer more cash back in specific spending categories. You might get 5% cash back at office supply stores, 2% cash back at gas stations, and 1% cash back on all other purchases, for example.

If you don’t spend a lot in one or two specific spending categories, consider a flat rate card that will help you earn cash back on all of your purchases.

Redemption style.

Some card issuers automatically creditcash back earnings to your monthly statement, effortlessly allowing you to reinvest in your business. Others let you build a cash back balance that can be used as a statement credit or redeemed toward travel or other eligible purchases.

Rewards caps.

Some cards offer unlimited cash back, others have spending caps. For example, you might only earn 2% cash back on eligible purchases for the first $50,000 of spending in a year, then 1% after that.

Spending limit.

Some cash back cards have a set credit limit while others are more flexible. Cards without a preset spending limit adapt to your purchase, payment, and credit history. This empowers a business to spend what it needs to get business done.

Additional cardholder perks.

Credit cards generally offer additional cardholder perks, such as employee credit cards, expense management tools, or added benefits like car rental loss and damage insurance.

Annual fees and APR.

Before deciding on a cash back business credit card, consider its specific terms and conditions, including its annual fee and annual percentage rate (APR).