Small business owners, more than any other
credit card users, are in the best position to profit from their use of credit cards.
Profit from credit cards?
The idea may seem foreign, if not preposterous.
However, the truth of the matter is simple: if you use your
business credit card wisely and open a high yield savings account, your credit card can
easily make you a few hundred dollars a month.
Let's begin by discussing the types of small business
credit cards on the market. The first and often easiest for new businesses to attain are
charge cards.
There are a wide variety of these available from American
Express' OPEN, the small business network. The first benefit of a business charge card is
the zero percent interest you pay. Yes, you must pay your balance in full in each month.
However, we’ll soon see how borrowing money interest free is a great thing.
OPEN credit cards, like other American Express business
credit cards, allow you to earn Amex rewards points with every purchase. In general, you
earn 1 point for every dollar spent. In general, a point is worth between 1/2 to 1% of
purchases, depending if you want to redeem your rewards for cash (1/2% value) or retail
gift certificates and travel rewards (1%).
Now let's assume your small business spends $10,000 a
month. You will earn $100 in rewards from American Express. Plus, if you place that
$10,000 into a high yield savings account with an interest rate of 4% or higher, you will
earn over $30 a month in interest. Thus, the net earnings you will accrue by using an
American Express small business credit card can easily equal $130 a month on $10,000
spending. Over the course of a year, that can add up to over $1500.
Small business credit cards with rewards provide similar
profit opportunities, and fantastic short term profit opportunities, as many offer 0%
interest rates for up to 6 months on purchases. For example, if you spend $10,000 the
first month you have a 0% small business card, you can earn $100 in rewards, plus a very
nice $200 in interest over the course of the introductory offer. When the 0% expires, you
simply pay your bill in full and avoid all interest charges. You'll find your business
$300 richer.
Once the 0% APR expires on a small business credit card,
you will have a "grace period" of around 25 days to pay off your new purchases
before interest is charged. Thus, you simply treat your credit card like a charge card,
and pay your balance in full each month, allowing you to earn rewards points on every
purchase you make while earning interest on the money you already spent.
Over the course of a year, a small business that uses an
American Express OPEN card and spends $10,000 per month can earn the equivalent of $1200
in Amex cash, travel, or retail rewards, plus over $400 in interest. That frees up over
$1600 in capital that can be used to offset the cost of travel, purchase new equipment, or
simply enhance your company’s cash flow.
Using small business credit cards strategically can
positively affect your company's bottom line, free up cash, and generate income through
interest and rewards. With the wide range of cards on the market, it is important for each
business owner to examine the interest rates, types of rewards, and fine print of small
business credit cards before making a final choice. Personally, I've been a proud American
Express OPEN Gold and Platinum small business cardholder for nearly two years and have
nothing but praise for the company.
©2006, Credit Card Depot Inc. |
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