Credit Cards are Tools not Toys
Having a company credit card can be a very valuable tool.
Key Benefits
It helps you grow business credit
It gives you travel rewards
It gives you cash back
It helps cash flow
It helps leverage your growth
What a Credit Card is Not
Your playground for personal spending
A loan
Too often I see business owners using a credit card as a way to fund their lifestyle. The better option is to either: one - use your personal credit card or two - take a distribution from the company and then buy the whatever. If you use the company credit card for personal use, the government will see it that way too!
Having business credit cards is a great way to purchase materials and services for your company. Especially monthly recurring costs like software subscriptions. This keeps these companies from having direct access to your checking account.
The travel points and cash back are huge benefits as well. I have a client who is taking his wife on a week long trip in April to Europe ALL on his company credit card travel reward point.
Wondering how to handle the rewards for taxes?
Donald P. Gould
Gould Asset Management, Claremont, CAIt depends on how the rewards are received. Most rewards are earned through the use of the card itself; for example, receiving one reward point for every dollar spent on a card. These rewards are considered rebates. However, rewards provided as an incentive for opening an account could be considered taxable income.
So if the rewards are REBATES it is not usually considered taxable income! That can add some serious pocket change to you as the owner.