It seemed almost too good to be true. After all, Uncle Sam is supposed to know everything and everything about your business finances, how could he let an opportunity to pinch a little extra pass by.
I called up my accountant friend, Alex.
“Alex, how much is my credit card rewards points taxed?”
“You mean I can redeem them all tax-free?”
“Even for personal use.”
I couldn’t believe it. After one year of business as a self-employed web designer, my business credit card had racked up enough points to redeem for $200 worth of Amazon cards, just in time for Christmas too!
If you own a business and a business credit card, then you are in for a treat. Business credit cards are great because they give you the opportunity to earn points for every dollar spent on them. These points can be used towards travel and other perks such as merchandise or gift certificates.
In this article, I will show you how to get the most out of your business credit card rewards program by hacking some of the most popular programs available in order to maximize your earning potential!
First, know the rules of the game
Credit cards were made like casinos except they’re buried underneath landmines. Credit card providers offer you all rights to payment. They offer you the right to take interest on your balances, penalty fees for late-payments and they say that if you want miles, then be our guest and take them.
But in order to get what you want, you have to know the game by heart and play it flawlessly—one small mistake and you’ll become another victim.
You have to know the rules in order for this game to work at all because nothing is worse than paying expensive interest rates on a balance you can’t make payments for.
So, before we jump in – know the rules of the game.
Rule #1: Read the fine print
Every credit card company is different. The terms of their cards and rewards programs are going to be different too.
That means that you need to know the ins and outs of your card before anything else because those little words in the fine print are going to be your best friend and worst enemy.
Know your balances, know when they’re due and where you can redeem points as well.
Rule #2: Know the value of a point
If you don’t know how many points your credit card company offers, then everything else is pointless. It’s like being an amateur gambler without ever reading the casino payout table or knowing how many chips your bet will get you.
A good way to do this is by finding your credit card company’s point redemption chart. If you can’t find one, then try looking up your card on the internet and checking for a rewards catalog.
The point redemption chart will show you how many points are required to redeem each different reward.
The best cards will offer you the most points for each dollar spent and also have a wide range of rewards available to choose from.
Rule #3: Ask for a higher credit limit
If you’re serious about taking full advantage of your card, then the first thing on your list is to ask for a higher credit limit.
Call up the credit card company and negotiate a higher limit. This way, you can spend more without breaking your budget and spending a lot of time worrying about money instead of working on your business.
Rule #4: Pay in full every month
The last thing you want to do is start carrying a balance on your card because then you’re going to be paying all kinds of interest rates on top of it.
This is a big no-no if you want to keep your points coming in and keep making those amazing travel plans.
Rule #5: Know the difference between cashback and rewards cards
There is a difference between cashback and rewards cards.
The first one is a slower process of accumulating points over time, but the latter will give you a lump sum of points all at once.
If you’re looking for an instant reward, then the latter is your best bet. Cashback cards are great for those who are looking to accumulate points over time and can’t invest the exact amount of money needed right away.
Wait for the big promotion
The reason I racked up so many points during my first year of business was that it was the first year I signed up for a business credit card. At the time, my credit card of choice was running a promotion for new members. If I spent $3,000 or something over the first 3 months I’d earn over 60,000 points (for reference sake that is a lot of points).
If you already have a business credit card, keep your eye out for additional promotions from other credit card companies. I’m not saying you should switch for the sake of a promotion, but I am suggesting that it is worth your while to find out if there are better onboarding rewards out there.
Business owners should also consider signing up for a credit card that offers cashback on business expenses. That way you can use your points to purchase a new piece of equipment that you need for your company.
Check credit and travel website reviews as well as google reviews and keep an eye out when there is advertising for a special welcome bonus. The wait is worth it.
What are the best business credit card rewards programs?
You’re probably wondering: “Okay, what are the best credit cards out there to rack up travel rewards?” A quick Google search will end up leading you to a bunch of paid promotional articles recommending “the best.” However, we don’t receive commissions on our recommendations.
Below are what I believe to be the top 5 credit card rewards programs you can join.
Capital One is a business credit card provider. The cards available are all no annual fee and offer cashback rewards on every purchase. Their rewards program is called Capital One® QuicksilverOne® Cash Rewards Credit Card.
Bank of America
The BankAmericard Business credit card has no annual fee and offers 0% APR for the first 12 months if you make your purchase with a paperless application, sign up online, or use their mobile app. This is perfect for business owners looking to finance their purchases.
Chase has a number of great business credit cards with different rewards packages and benefits. There is also a $100 cash rewards bonus if you spend at least $500 in the first three months of your account opening.
The Chase Ink Business Preferred offers 60,000 points when you spend $5000 in the first three months. It also offers a bonus of 80,000 points when you spend $150,000 in the first year.
The CitiBusiness® / AAdvantage® Platinum Select credit card is a fantastic option for business owners who spend $50,000 per year on the card. The card offers a 50,000-mile bonus for each $50,000 spent on the credit card in one year.
The Discover it® Business card is a fantastic option for business owners who spend $5000 per year on this credit card. The card offers cashback that can be redeemed at any time, without having to wait until the card anniversary year.
Credit Card Rewards hacking
So, by this point, you might be wondering what’s the point of racking up all these points? (How many ways can I use the word “point” in a sentence?) Well, let me introduce you to travel hacking. Now, to be honest, I don’t have much of a need to travel hack my credit card. I’d much rather redeem my points for gift cards and lavish my kids with extra Christmas presents each year.
However, Alex and I recently had the opportunity to speak with Eli Facenda, colloquially known as Eli the Travel Guy. Eli sat down and introduced to us the idea of maximizing your credit card travel points for free travel.
Don’t get caught flabbergasted by next year’s tax bill if you are self-employed and haven’t been paying your estimated quarterly taxes. That’s right, even if you have a full-time job and earn a side hustle income, the IRS still requires you to cough up their share. In this week’s episode, Alex and Declan share everything you need to know about self-employment taxes.
Learn more at simplefiscal.com
In order to travel hack, you must first have a high-value credit card. Eli recommends you use one of the top five credit card rewards programs out there (some of them are covered in the previous section).
Next, you need to start maximizing your miles and points by spending money in your small business for specific categories. Some cards offer higher card points or miles based on whether you spend on travel, dining, or office materials. Other cards offer bonus rewards from time to time so pay attention to those as well.
Then, when it comes time to redeem your points and miles, take some time to research your options. Some credit card companies allow you to transfer your points and miles to other programs that offer a higher rate of exchange. For example, 1,000 miles in your credit card rewards program might be worth 1,250 miles for a specific airline.
However, if you ever convert your points, make sure you are certain to redeem them. There aren’t options to “unconvert” your points.
Finally, when it comes time to travel, make sure to spend on your credit card again to rack up even more points!
Be mindful of your credit utilization
Your credit utilization rate is the rate at which your credit is used at a particular time. Experts recommend never exceeding your use rate of 30%. For example, if your limit is $20,000 and you have spent $15,000 in the past month, your utilization rate is 75%. Way too high.
You want to use up about 30% of the credit available on your card so that when it comes time for an approval or a purchase, this will show you as being responsible with your spending habits
However, never pay for balances just to get mileage or points. Stick to your budget and spend on things you already need.
While travel hacking and earning points is exciting and fun, don’t purposely go into debt for a free vacation. It isn’t worth it. If instead, you treat your points like a little bonus at the end of the year, you’ll be in a much better headspace to keep your spending under control throughout the year.
The most important thing in life is to enjoy it and spend it wisely. This article has shown you how to take your business credit card rewards program from ordinary to extraordinary with a few simple hacks that are sure to give you the upper hand against other businesses!
You can find more helpful financial tips at SimpleFiscal.com so don’t forget about us when you’re ready for some expert guidance on saving money or increasing your income. We hope these hacks help make your experience as rewarding as possible, both in your business and in life.