Low Interest vs Cash Back vs Rewards Credit Cards

If you are going to use a credit card for your business and face the interest rates you might as well get some sort of reward for your efforts. The problem is that it is very difficult to choose the best possible reward for your business because of the many options available. You can start by comparing the types of rewards and once you have identified one or two that might be best for you then you can begin your search for the right card. A lot of business owners choose cash back rewards because they believe this is the best and easiest way to recoup their rewards. Under some circumstances though cash back rewards may not be the best deal. In the following paragraphs the pros and cons or low interest, cash back and other rewards are explored to help you make the best choice for your business.

Low Interest Credit Cards

If you do not plan to pay off your credit card balance with each billing cycle then a low interest rate credit card should be your top priority. Most business owners use their business credit cards as a financing vehicle purchasing large volumes with the available credit on the card. In such a case it is important to place low interest rates above any rewards that you can get with another card. Even if you feel that you will be able to pay off your balance monthly you should err on the side of caution and still select a low interest card if you can get it since you never know if you need to use that credit limit as capital for your business.

When choosing a card beware of low introductory rates that can skyrocket after the promotional period ends. An interest rate of around 12% is standard for businesses with a good credit rating and even less if you have an excellent track record. Keep in mind that the lenders can change your rate at will based on your business credit and the way you manage the account.

Pros of Low Interest Credit Cards

• Save money with low finance charges especially if you make large purchases with the card.
  
  
• Lower minimum monthly payments because of the lower finance charges.
  
  
• Pay off your balance at a faster rate.
  
  
• Less impact on your credit score when card balance is considered as a part of the rating.

Cons of Low Interest Credit Cards

• Low interest cards usually have an annual fee.
  
  
• You will need to have an excellent credit rating in order to qualify for the best rates.
  
  
• The rewards with these cards may be significantly less than those with higher interest rates.

Cash Back Credit Cards

With cash back programs you earn cash back as a percentage of your daily purchases. The earnings are usually flat rate earnings but there are a few programs offer tiered earnings. The percentage back varies from program to program and could range from 1-5% depending on where you shop.

Pros of Cash Back Credit Cards

• Fewer restrictions than reward point credit cards. You won't have to worry about shelling out extra money to redeem your earnings, expiration or trying to redeem on products that you don't need.
  
  
• You get cash back that you can use any way you want instead of having to choose between a range of products or services that is predetermined by the credit card provider.

Cons of Cash Back Credit Cards

• With some providers the rewards are only paid once yearly. If you need the rebate sooner then cash back incentives may not be the way to go or you might have to search for a provider who pays monthly or quarterly.
  
  
• The incentives may be flat rate regardless of where you purchase. In order words no opportunities to increase your rewards.
  
  
• If the program is tier based you might have a hard time following and understanding how the program works.

Reward Point Credit Cards

With reward point programs your rewards are earned as points or miles for every dollar spent. There are a number of program types ranging from airline miles (most common), gas rebates, hotel rewards, dining rewards and numerous others. Your points are earned when you use the card to make your regular everyday purchases and you are given the opportunity to earn extra points when you shop at specified partner locations. You can redeem your points for the designated rewards once you reach the predetermined level.

Pros of Reward Points Credit Cards

• Once you reach the predetermined level you can redeem your points whenever you like.
  
  
• You choose the rewards that suit your lifestyle and business.
  
  
• Opportunity to quickly amass points when you purchase at specific partners.

Cons of Reward Points Credit Cards

• Your points can only be used for the products or services provided by the program.
  
  
• You can only redeem point at designated locations.
  
  
• You have accumulated a specific number of points in order to redeem them.
  
  
• Points may expire before you have had a chance to use them.

It is up to you to determine the best reward for your business. You might have one need today but that could change later on so take this into consideration. If this happens you might have to change programs later on. Whatever you decide choose the best credit card that you can get for that specific card type.

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