How To Make Business Credit Cards Work Hard for You

(December 22, 2017) — Website operator Lou Haverty is passionate about his business credit cards — so much so that he has figured out how to use them to save thousands on business expenses.

“I really enjoy traveling,” says Haverty, who runs The First Class Travel Guide website. “I just don’t like paying for first-class travel. So, I try to use the business credit cards to take the most expensive trips possible while spending as little each month as I can.” In fact, he is able to fund one or two such trips a year with credit card points from business cards he’s opened.

With the right cards and the right spending, you can save thousands each year on travel, business expenses, and more. We’ll walk you through how to use a business card, how to choose one that’s right for you, and what not to do.

First things first. With hundreds of credit cards out there, it’s easy to get confused, but it’s important to understand the difference between business and personal cards.

Perhaps the biggest difference is that business cards don’t have the protections of consumer cards under the Credit CARD Act of 2009. This law protects college students, at-home moms…pretty much everyone except the holder of a business credit card. But that doesn’t mean you should shy away from a business card.

That’s because with a business card you can separate your business expenses, manage your spending, and collect sweet benefits and savings. It’s also worth your while to have a business card in your company’s name to build credit.

Business credit cards often have more generous signup bonuses and spending benefits, although they may also have higher annual fees as well. But an annual fee shouldn’t scare you away. That’s because if you time the spending, you can actually come out ahead and save hundreds a year in cash and travel.

We’ll walk you through the best cards and what they have to offer.

First off, there’s the

, with which you can earn a $500 signup bonus after you spend $4500 within the first three months from opening your account.

Add to that, you can get 2% cash back on everything, unlimited. So, if you spend $5000 on your card, that means you earn $100 a month back, or $1200 for the year. And because the $95 annual fee is waived the first year, you get the $500 plus the $1200 free and clear, provided you don’t carry a balance month to month. Also, you can get employee cards at no extra cost, allowing you to earn rewards from their business spending as well.

If you are looking for a cash-back business card with no annual fee, there’s the

.

The signup bonus is lower on this card, only $200, but the required spend is also lower, at $500 on purchases within the first 60 days of opening your account.

The spending rewards are excellent, with 3% back on purchases at gas stations and office supply stores; 2% back at restaurants; and 1% on everything else. There’s an annual cap of $250,000 on the 3% category, then it’s a 1% rate after that.

The Bank of America cards have the advantage of allowing you to redeem your cash rewards as a statement credit, a check, or you can apply them to a Bank of America savings or checking account.

The

cards are also excellent products, each in their own way. One, Ink Business Preferred, offers 80,000 signup points after a $5000 spend within the first three months of opening your account. That comes to $1000 toward travel when you redeem through Chase Ultimate Rewards, a travel portal that certain Chase cards align with. Using Ink Business Preferred, you get a 25% boost when you use its points toward travel through the portal.

Another feature of this card is that you earn 3X points on such categories as travel; shipping; internet, cable and phone services; and social media advertising on the first $150,000 in combined spending. It’s 1X point for everything else. With the 3X points, that means $5000 a month becomes 15,000 points a month, or 180,000 points for the year. There are no foreign transaction fees, and employee cards are at no extra cost. As the Ink Business Preferred shows, business cards’ travel rewards can be lucrative.

For example, Haverty was able to fly better than first class from Abu Dhabi. He booked seating in one of Etihad Airways’ luxurious Etihad Apartments, an approximate $7000 expense for mere mortals. Haverty’s costs were $43.75. Here’s how he did it: He opened accounts with Citi/AAdvantage Platinum Select World Elite MasterCard and CitiBusiness/AAdvantage Platinum Select World MasterCard, each with 50,000-point signup bonuses at the time. Those combined 100,000 points allowed him to travel one-way in the onboard apartment, which includes amenities like a shower, gourmet dining, and private room.

Pay close attention to limited time offers, because with them you can get a hefty boost. For example, during the month of November, the

cards offered 60,000 signup bonus miles after a $3000 spend the first three months of opening your account.

Also, with the

card, your first checked bag is free on domestic American Airlines itineraries for you and up to four companions with you on the same reservation. You also get preferred boarding.

And, you can earn 2X miles on every $1 spent on eligible American Airlines purchases, as well as 2X miles on purchases at telecommunications and car rental merchants, and at gas stations. It’s 1X mile on all other purchases. The $95 annual fee is waived the first 12 months.

products vary widely in annual fees, from zero to the hundreds. The

has no annual fee, for example, yet it has been known to have a special offer of up to $400 cash back. Here’s how it works:

You earn a $200 statement credit after a $5000 spend within the first six months of card membership. Then, you can earn another $200 statement credit after another $10,000 spend within the first year of card membership.

Also, this card offers a whopping 5% cash back on wireless telephone services purchased directly from U.S. service providers and U.S. office supply stores. There’s also the 3% back on a category of your choice from a list of eight. It’s 1% back on everything else. The 5% and 3% categories apply to the first $50,000 in purchases per calendar year.

The higher-end cards, for example the

OPEN with its $450 annual fee, may seem rich, but its benefits are robust.

The Amex Business Platinum allows you to earn up to 75,000 points, including 50,000 points after you spend $10,000, and another 25,000 points after another $10,000 is spent within the first three months of card membership.

You can also earn 5X points on flights and prepaid hotels on amextravel.com; get 50% more points on each purchase of $5000 or more for up to 1 million additional points each year; and a 35% airline bonus. You can also receive 35% in points back on all first- and business-class flights with airlines available through American Express Travel.

Finally, the Business Platinum has a feature you’ll find with other higher-end business cards — access to airport lounges. But with this card, you get access to the American Express Global Lounge Collection, which American Express says offers more lounges throughout the world compared to other U.S. credit card offerings, as of June.

Before jumping into how to use that shiny new card, it’s important to understand credit scores, credit reports, and credit bureaus. Yes, there’s a difference.

A business credit bureau collects data from a variety of sources (such as courts, card companies, and vendors) and uses that information to build your credit report, which lenders and vendors will periodically pull. The dominant business credit bureau is Dun & Bradstreet, but there are others, including Experian.

The credit scores and ratings rank your credit with a numeric scale based on a rubric that assesses the data in your credit report. That’s what lenders typically look at to assess your creditworthiness.

It’s important to understand that many banks not only report business credit card information to business credit bureaus, but they also send negative information to consumer credit bureaus, even if you took care to separate your business credit from your personal credit. You likely made a personal guarantee when you signed up for the card, so even if you separated your personal from your business credit, a defaulted business card can impact personal credit.

That said, there are a few tricks to successfully using a business credit card, both for building credit and for saving money.

The most important thing you need to know is pay on time and in full each month, since you should be concerned about your personal or business credit. This will help you when it comes time to apply for a loan.

Some business cards, such as the Business Platinum Card from American Express OPEN, are charge cards. That means you have to pay in full each month. The advantage is that there is no preset limit, so if you need to make a big purchase you can be approved within minutes.

Most business cards are credit cards, though, which means you can carry a balance month to month, although that’s not advisable for two reasons. First, you’ll incur hefty interest charges if you pay month to month. That’s wasted money. Second, the higher your available credit and the lower your balance, the better for your credit score, because credit scoring models love it when what is called your credit utilization ratio is low. So, if you have $50,000 in available credit and owe $5000, your ratio is 10%. You want it to be as low as possible.

The other component of smart card use is paying on time. You need to pay on time each month, partly because you can be fined for paying late or lose the account, and it can impact your credit.

Another little-known tip: Don’t put business cards in a sock drawer and forget about them. That’s because you risk your account being closed if you don’t use the card. At minimum, put a small charge on the card each month and pay in full on time. You boost your credit a little each time.

Now for the fun stuff: If you want to take full advantage of your card, put everything on it, hiking your points with every purchase. The more you put on your card, the more the travel or cash back you’ll get out of it. Make sure your employees are using it too, giving those points even more of a push.

But what about the annual fee? Yes, those fees can run in the hundreds each year, but that shouldn’t necessarily scare you away. Study how you plan to use the card, whether for Office Depot shopping or gas or utility bills. Now, add up how much you plan to spend and calculate the points you’ll earn each month.

For example, take the Chase Ink Business Preferred, which offers 80,000 signup points after a $5000 spend. Then, if you spend $5000 a month on travel, shipping, utilities, and social media advertising, that comes to 15,000 points a month or 180,000 points for the year, bringing the total to 260,000 points.

Now, the Ink Business Preferred’s annual fee is $95, but the 260,000 points more than pay for the annual fee. Look at it this way: $95 equals 9500 points. That means after you take out the 9500 points, you have 250,500 points, or more than $3100 for travel when you use the Ultimate Rewards portal.

One thing: It’s typically best with a business card to keep personal charges on a personal card. Why? Partly because you agreed to use the card for business expenses, and partly because come tax time you will be able to more easily organize your expenses. In fact, many business cards have online organizational tools to help you with this.

So, now that you are armed with the tools to thoroughly enjoy travel at its best, or even just sweet savings, choose the best card for your spending. — Laura Mohammad