Credit Card Rewards
As we all know from the commercials, there are a wide variety of rewards available from credit cards. Credit cards that provide awards can be a huge boost to a small business that pays off its cards during the grace period so that it avoids the interest costs. Otherwise, the rewards are an example of false economy, providing less in return than the interest costs for financing the revolving debt.
Types of Rewards
There are four primary categories of awards available with credit cards: travel, gasoline, cash back, and retailer rewards.
Travel Rewards
Travel rewards are available from almost every issuer of credit cards. In deciding which travel card to select, the business needs to analyze the vendor (hotel, airlines, rental car company) that the business uses the most. Also, the business should consider whether to select a card that allows the miles to be applied to any airline.
When considering the travel rewards, the business needs to research to learn whether the airline’s miles can also be used for other purchases. This can be a great way to get client appreciation gifts or employee gifts.
Gasoline Rewards
For a business that spends a significant portion of its budget on fuel, this can be a real bonus. Some cards provide discounts at the pump in addition to bonuses based on the total amount spent. These cards make the most sense for businesses with a large sales force or a number of delivery vehicles.
Cash Rebate Cards
When a business is able to pay its charges off at the end of each month, cards that provide a cash rebate can actually improve the bottom line significantly. Some cards provide up to 7% cash back. This is the equivalent of receiving a 7% discount on every item purchased. But, if the business is financing at a 14% APR, obviously, in the long term, this is a balance sheet killer.
Retailer Rewards
The reward that is least valuable for most small businesses is the retailer reward. About the only real use for these rewards in most circumstances is to provide gifts for employees or clients.