Business credit cards with rewards

One of the reasons businesses use credit cards is for the rewards. Many card issuers offer various rewards for spending including air miles, cashback, or reward points that can be redeemed, and if used correctly these cards can subsidise your spending, because you get money back or cash equivalents when you use the card.

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 Business credit cards with rewards

Let’s face it, a business credit card is a must-have for day-to-day business expenses. But, with so many different types of business credit cards on the market, you will need to find out what cards have the best rewards or if cashback credit cards are more economical.

What is a business credit card?

A business credit card is a card that is used exclusively for business transactions and can include expenses of all types from customer hospitality, supplier invoices, stock, and all other ad-hoc expenditure up to the purchase of high-value plant and machinery. A business credit card functions in a similar way to a personal credit card. That is to say, you buy things on credit, and at the end of the month you pay off the outstanding balance. The more you buy, the more rewards you earn.

Business credit cards are used by everyone from sole traders and small businesses to limited companies. Business owners can use credit cards to build up the credit profile of new businesses, which can help if they need to borrow money in the future. Don’t forget to pay off the balance in full at the end of each month, or this will count as a negative mark against your credit profile. In addition, it’s equally important to try to stay within your credit limits.

What are business credit card rewards?

Many business owners don’t maximise the benefits available through credit card rewards. Business rewards can be earned for air travel, accommodation, client entertainment etc. The two main types of business credit card rewards are points and miles. 

What can I redeem my credit card points against?

Once a certain threshold of points has been accumulated, a business can exchange these credit card points against various things include, including but not limited to the following:

  • Reduced fares for flights, hotels, and rental cars

  • Gift cards for suppliers and vendors

  • Discounts on gas, stock, and equipment

  • Charitable donations

Points and miles versus cashback

A good way to illustrate the difference in business savings between points and miles-based business credit card rewards or cashback-only rewards is with an example. Let’s imagine your head of sales spent £5,000 on business air travel the previous year. This card earns you 3x miles on business travel commutes, totalling 50,000 miles and 10,000 bonus points. You could use these miles and points balance for two free plane tickets from London to Frankfurt, including a 2-night stay in a hotel. But you would need to consider whether this is more economical than getting 2% direct cashback on all of this employee's expenses.

Each employee and business is different, but you can do a rough calculation based on real pound value, card spending terms, and redemption terms.

Real pound value

You can think of points as prizes at a theme park. You pay money for a chance to win, but the prize itself is often worth less than the money you spent. Hence the need to calculate how much your points are worth in pounds. This can be done by dividing the cost of a redeemable item by the number of points required to claim it. You will need to factor in how much you have to spend to earn these points. In the case of a cashback credit card, the calculation is simple, the percentage you get cash back is what you have earned for your purchases. 

Card spending terms

When it comes to the terms of your business credit card, it is not only the interest-free period that you should consider — although, of course, this is an important consideration. The annual percentage rate (APR variable) is the second key metric to look at when comparing different business credit card rewards. It’s also important to always look at the representative APR. This is the rate per annum inclusive of all related charges including the interest rate. Check out if there is an introductory purchase rate & period, and the minimum monthly payment amounts, for example, Barclaycard Business is 1.0% or £5.00 per month or the total of any interest, default fees and charges plus 1% of the outstanding balance. You will need to investigate if there are annual fees or late payment fees.

Interest rates

Business credit cards can be expensive if you don’t pay the outstanding balance each month as interest rates are higher than personal cards. The interest rates for credit card purchases are usually between 15-25%.

A lot of providers offer an interest-free period on business credit cards which can be a real bonus to businesses so you should definitely check whether yours has one.

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Extra charges and fees

Some business credit cards charge annual fees so when you’re weighing up different businesses credit cards, check the benefits offered by a particular card aren’t cancelled out by an annual fee.

Some providers also charge inactivity fees, a charge that’s applied if you haven’t used the card for a set period of time, which is worth thinking about if your business needs flexibility.

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Credit limits

This is the maximum amount that can be outstanding on the credit card. Your credit limit will be based on your business’s creditworthiness and usually varies from between £1,000 and £10,000.

Initially, lenders may give you quite a low credit limit as you’re a new customer and they don’t know how consistent you’ll be with payments. If you establish yourself as a responsible customer, the provider might be able to give you a higher credit limit.

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A lot of business card providers offer rewards for taking a card out with them. These are things like air miles, cashback and shopping points. Business credit card rewards can be a great way to make back some of the money spent on the card.

It’s worth thinking about how much value the rewards will have for you — if a card offers you air miles as a reward but you don’t take flights for business trips, that card’s reward isn’t for you and you might be paying a premium for something you won’t use. Find out more about business credit card rewards.

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Redemption terms

You can earn points for many different business expenses from office supplies to business advertising, booking conferences and even building works. It will take a bit of time to research the different terms and conditions that apply to each card before you apply, but it will be worth your time. Let’s take a quick look at some of the terms applicable to American Express business credit cards.

  • Enrollment is required

  • Annual programme fee for green or gold corporate card

  • Some corporate cards are not eligible for enrollment

  • Participating membership rewards partners and available rewards are subject to change without notice

  • Corporate membership rewards are subject to approval by American Express

  • Points can not be accrued before the enrollment date

  • Points will not be accrued for cash advances or any cash service

Every credit card provider will have a different set of redemption terms and conditions for business credit card rewards, so it’s worth doing up an Excel spreadsheet so you can compare and contrast the different options.

How do I choose the best business rewards credit card for my business?

The main decision you will have to make is choosing between a card that has heaps of tantalising rewards redeemable against points or air miles versus a cashback credit card—typically with 1% cash back for every eligible £1 spent. The Capital on Tap Business Credit Card offers an upgrade to Capital on Tap Business Rewards Card for £99 pa to choose from earning cashback or Avios and you will receive 10,000 bonus points when you spend £5,000 on your card in the first three months. 

Let’s say your business pays a high interest rate on a large monthly balance. In this case, the benefits of frequent flyer points or travel insurance discounts will be overshadowed and not economical. A business owner would be better off choosing a card with a lower APR instead of a card with rewards or a long interest-free period. In contrast, a business with staff who need to travel overseas frequently might be better suited to a card with frequent flyer points. The best advice is to take a holistic view of what the card can offer you and try to see past the short-term perks and incentives. 

What’s the value of British Airways Avios?

We spoke earlier about Avios. These are the points on offer from British Airways and can be used to purchase flights. Based on data from economy routes, it appears that each Avio is worth around 0.8 pence or more, so bear this in mind when you are considering award redemptions. If you want to know the value of your current Avios balance you can use this handy calculator for Avios

Business class awards offer much more valuable redemptions than economy awards. The business class redemption rate is estimated to be closer to 1.9 pence for each Avios —more than double the rate for economy class.

Travel cashback promotional offer terms and conditions

Each credit card is different, but here is an example of some common terms and conditions that you should look out for:

  • Increase cashback % for the first four months

  • Eligible travel means car and van hire, car and van fuel, electric vehicle charging, travel and accommodation bookings, air/rail/road travel or any foreign spend

  • Promotional rewards are subject to the status of business current accounts, so be careful of short-term changes that may influence your eligibility

  • Eligible travel spending excludes cash withdrawals, insurance premiums, interest and other fees and charges

  • Rewards can be cancelled if you exceed your credit limit or fail to make your monthly minimum payments.

Worth considering

Before deciding on a business credit card, you will need to consider the value of any first-year bonus and its spending limits and rewards to determine how much you or your employees will have to spend to reach or exceed the cost of any annual fee. For example:

  • Miles are generally worth around 2 pence. On The Points Guys website, you can check points and miles valuations updated monthly. If the bonus is 50,000 miles and each mile is worth 2 cents, then the bonus value would equal £1,000. More often than not you have to spend a set amount within the first three months to earn the one-time bonus. But, for example, if you have to spend £3,000 to get a £1,000 bonus, you are looking at a 33% return on the required spending amount

  • If a business card gets you 2x miles for each purchase, every £1 that you spend will earn you £0.4 in rewards value or 2%

  • In general, points and miles can be more valuable than cashback credit cards. The caveat here is that you will need someone who can do some research into the best cards for your business and then manage the rewards programme to maximise the benefits

Important to note

It’s worth looking out for the following when you apply for a business credit card.

  • Certain cash advances carry a higher interest rate than purchases and have no interest-free period

  • Business credit card providers may forego fees if you take the card as part of a suite of services

  • Credit cards are a form of unsecured lending. Therefore, a business with a good credit history won’t require security

In brief

The main question you need to ask yourself when trying to decide between miles/points vs cashback cards is which type of rewards are best suited to your business and industry. Will you be spending enough to break even on a card, especially if it has annual fees, and if there are no fees are the cashback percentages high enough to make it worthwhile? Be sure to always check the representative APR and look closely at the small print for how to apply for rewards and how to redeem them.

Questions like whether the rewards expire and if you can transfer rewards from one programme to another are worth asking at the start. If you don’t think you or your employees travel enough for business travel rewards including hotel stays, you might want to choose the flexibility that comes with a cashback card.

Choosing the credit card that will best suit your business could save you thousands each year.

Joe Morley
Joe Morley

Head of Unsecured Lending

Joe has worked in the alternative lending space since 2015. During this time he has helped hundreds of SMEs access millions in essential funding ranging from long-term asset-backed lending to short-term unsecured revolving credit lines and beyond. In his role, Joe manages and supports a large team of Credit Finance specialists.

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