Chances are the credit card you use for business charges offers rewards. And if you’re like many small business owners, tis the season for cashing them in.
More rewards are redeemed in December than in any other month of the year, with redemptions this month doubling most other months, according to Wells Fargo. In a recent survey of more than 1,400 of its small business customers, the bank found that about half redeem rewards for end-of-year cash bonuses or for merchandise they can give to employees as gifts.
The most popular merchandise reward items? Pro V1 Golf Balls, Single-Cup Brewers, Noise Canceling Headphones, 7” Digital Photo Frames, 8-Sheet Crosscut Shredders, and iPod touches.
Wells Fargo reports that its small business customers appreciate how easy it is to earn bonuses and redeem points with its program for a variety of rewards that make appropriate employee gifts.
The Wall Street Journal reported last month that increasing competition for credit-worthy customers is driving credit card companies to offer more lucrative rewards, and spurring users to use their cards more at the holidays to rack up rewards:
“Consumers took on $43 billion in new credit-card debt in last year’s fourth quarter, compared with $11.8 billion in the prior quarter, according to an analysis of data from the Federal Reserve and Fitch Ratings by CardHub.com, another card-comparison site.”
WSJ reporter Annamaria Andriotis says lenders are issuing more cash back, offering deeper discounts, and making it easier to earn free travel. Others let borrowers put off interest payments.
But “deals are only deals,” Andriotis says, “if you’re paying your balance in full each month, because the interest charges you’ll incur will wipe out the benefits of rewards,” especially on cards whose rates top 20 percent.
She warns against incentives that prompt users to overspend, and the website CardRatings cautions business owners: “Not all business rewards cards are equal. And some, no matter how strong their points programs are, might not be the best card for you.” (A clue: Andriotis says some credit unions and small banks are offering good deals.)
CardRatings recommends that business owners check a card’s interest rate, annual fees, and policies regarding penalties for missed or late payments. In some cases, the penalties or fees offset any rewards. It also warns that, “Many of the protections provided on consumer credit cards from the Credit CARD Act of 2009 do not apply to business credit cards.”
CardRatings also warns against giving in to the temptation to charge personal items to your business cards. Why? “If someone sues a business owner, that owner’s personal assets could be subject to legal action.”
For more, check out CardRatings.com article, Everything you need to know about business credit cards.