Business credit cards with rewards

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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