Net Savings Equals Zero, Since You Need To Pay The Annual Fee On Your Business Credit Card

Category: Finance.

The cash back terms may vary from one business credit card issuer to another or from one business credit card type to another. There are cash back business credit cards that say" up to 5% cash back. " This simply means that some purchases get more credit than other purchases.

The points you earn may also differ depending on the item that you purchase with your business credit cards. The common theme may be that business credit card purchases of everyday business items like gasoline, overnight courier services, office supplies, and the like, are likely to earn higher rates of cash back than less business- related expenses. Most, cash back business, if not all credit cards impose a ceiling or a maximum on the annual cash back points that you can earn. There are things about cash back business credit cards that the business credit card holder should keep in mind. If your cash back business credit card charges an annual fee for membership, try to calculate if you will get any actual savings. Your cash back business credit card may allow you to accumulate up to 25, 000 cash back points only, and then redeem your points at the rate of$ 1 for every 100 cash back points. For instance, let us assume the cash back business credit card comes with a$ 250 annual fee, and also that you will earn one cash back point for every one dollar purchase using your business credit cards.

That means you can hope to redeem only a maximum of$ 250 in one year. Of course you still saved enough to pay off the business credit card annual fee, but you also, not bad had to spend$ 25, 000 in the process. Net savings equals zero, since you need to pay the annual fee on your business credit card. This assumes that you always pay off your business credit card balance in full every month so that you do not incur finance charges on balances that you carry. If purchasing that much is routine for your business, by all means you should get that cash back business credit card. Otherwise, you should deduct the interest cost from the savings you receive.

But what if you spend much more, are you going to waste all the points? Speaking of another business credit card, you might consider one that promotes a different set of products and services that earn bonus points. Your option in such a case would be to secure a cash back business credit card where you can accumulate more cash back points. For instance, one cash back business credit card might give generous cash back points on everyday business expenses while the other business credit card might be for those frequent flyer miles and travel cash back points. Find out from your business credit card issuer what the terms and conditions are on these cash backs and rewards so as to maximize the benefits you earn from them. Do not forget, that there may, too be an expiry date attached to these points.

Determine what services and products your business needs to spend on most frequently and select the business credit cards that give the most benefits on those purchases.