How to Make Credit Cards Work for Your Startup

By Robert McGarvey | Monday, 05 December 2022 | Feature

You have heard the stern advice: beware of credit cards, too much debt will destroy your business’s dreams.

That’s true — but only so far. Carrying debt at as much as 18% APR is definitely crippling to many businesses. But, when used judiciously and with balances paid off monthly, entrepreneurs insist business credit cards can be rocket fuel for powering startup growth.

Ben Kuhl, CEO of Shelf Expression, a Charlotte, North Carolina builder of custom shelves, cabinets, and home decor items, tells how he has used credit cards to build his business. Says Kuhl, “We've been strategically using credit cards to fund a good portion of our startup expenses. Starting a woodworking production business has a very high barrier to entry due to the high costs associated with production-grade equipment. We've used two credit cards and their sign-up bonuses to help us grow.”

“Our go-to card for everyday purchasing has been the American Express Amazon Business card,” he continues. “This card offers 3% in Amazon credit on all Amazon purchases. We purchase all of our consumables through Amazon (and some equipment), and this card routinely provides us with $200-$500 in Amazon credit every month. This has allowed us to buy machinery through Amazon solely funded by necessary monthly purchases.” That card is fee-free.

Kuhl adds, “The second card that we highly recommend and use is the Chase Ink Business card. When we started our business, we obtained this card with a 100,000-point bonus if we hit the $15,000 spend minimum over three months. After hitting this spend minimum, we then used the 100,000 points to purchase additional machinery for our shop.”

(Note that there are several flavors of Chase Ink Business card. The cash back card, Chase Ink Cash, has no annual fee.) 

Ben Walker, editor at FinanceBuzz, is another fan of the Chase Ink Business card. He explains, “The best business credit cards are typically the ones with rewards that align with your everyday business expenses. If you have phone and internet expenses, I like the Chase Ink Business Cash because it provides a 5% bonus rate on those and other categories.”

But, Walker warns, there is a cap on that 5% rate: “That rate is capped at $25,000 per year. After you hit $25,000, the rate drops to 1% for the rest of the year.”

There’s a simple solution, however. Use the card until it reaches that ceiling, then switch to other plastic. Walker points to another favorite: “Capital One Spark Cash Plus offers at least 2% unlimited cash back on all your business purchases. Spend $200,000 in a year, and that’s $4,000 in cash back, which easily offsets the $150 annual fee.”

Shaun Martin, owner and CEO of The Home Buying Company in Denver, says his top pick is the Capital One Venture X Rewards credit card, which “offers 2x miles on every purchase, with no limit to the amount of rewards you can earn. You can also redeem your miles for travel expenses, making this an ideal card for business owners who often travel for work.”

Venture X has a $395 annual fee, but it includes a $300 annual travel credit as well as an annual bonus of 10,000 miles, which Capital One values at $100, which together cancel out the fee.

John Taylor Garner, founder and CEO of Odynn, a credit card rewards optimization platform, offers a sharp warning to newbies looking to optimizing credit card rewards. Some cards, he says, offer great rewards, but they may be difficult to redeem in practice. So keep an eye on the value you are getting from the cards in your arsenal, and don’t hesitate to move on from a card that has more glitter than genuine benefits for you.

Playing With Fintechs

Garner also suggests looking beyond the name-brand cards issued by the financial services giants. He in fact points to a lesser-known card as a favorite: “If you want a simple card that has great expense tracking and offers non-complex rewards, then the Ramp credit card is it. The card earns unlimited 1.5% cash back on all purchases and has no annual fee.”

The Ramp card also proclaims that it was designed with startups in mind.

Garner also likes Brex, another card designed for startups.

Both of those cards offer built-in accounting features that are designed to help a small business keep better track of expenses.

You’ve never heard of Ramp or Brex? That’s the point: nowadays, fintechs are busily rolling out new credit card products — many aimed at startups — so look beyond the cards from the name issuers. You just may find a card that best suits you and your business at a fintech.

Score Big Signing Bonuses

Another way to maximize the benefits of a credit card is to apply for and get ones with rich sign-up bonuses. 

Brian David Crane, founder of Spread Great Ideas, a business digital marketing fund, singles out one such card: the American Express Business Platinum card, where the annual fee is $695. But hold on: there’s a sign-up bonus that sometimes hits 150,000 American Express Membership Rewards points, which The Points Guy values at $0.02 per point, which totals about $3,000. Other times the sign-up bonus is 100,000 points — worth around $2,000 — but that is still a rich inducement to get the card.

The requirement for earning such rewards is spending $15,000 on the card in three months. That’s not hard because AmEx offers 5x points when buying airfare through the company (ditto hotel stays), and those points, of course, can be put to use buying more flights and hotel room nights. There are plenty of ways to smartly use this AmEx card.

FinanceBuzz’s Walker is another fan of AmEx Business Platinum which, he says, “provides over $1,000 in potential business value. This comes from annual benefits such as $400 in Dell credits, $360 in Indeed credits, $150 in Adobe credits, and $120 in wireless phone credits.”

Walker’s right — the AmEx card comes with a long roster of available offers. Many require sign-up (a fast and easy process on the American Express website). Offers do change and occasionally expire. But cardholders insist that AmEx continually restocks the offers, so even when a favorite offer is discontinued a new one that is just as tasty may take its place.

Use the built-in perks, and this card can literally pay for itself, despite its high annual fee.

AmEx points, by the way, can be used to shop at many retailers, including Amazon, Walmart, and Best Buy. The value is around $0.07 per point – there are higher return uses for the points, but if ready cash is short and points are plentiful, don’t be shy about using them for business necessities.

Hunting for Bonuses

Shop around, too. Generous account opening bonuses are plentiful. Right now, the Citi Premier card (annual fee $95) offers an 80,000 point bonus if you spend $4,000 in the first three months, and those points can be cashed in for travel or gift cards. Other big banks — Bank of America and Wells Fargo, for instance — have similar offers.

Southwest Airlines has a welcome offer of 75,000 miles for signing up for its credit card (annual fee $69). All of the other major US airlines — American, Delta, United — have similar offers. Go for a card with a carrier that has a big presence in your region. That will make it so much easier to use the miles you get for signing up.

Hunt for sign-up bonuses, and, experts say, it will be simple to gather up a quarter million points in sign-up bonuses in a short time. But a word of warning: every application reduces your credit score, and a flurry of applications can result in a significant decrease. Take it slow, and the points will come in with negligible impact on your credit score.

And just don’t let credit card purchases become debt that requires big interest fees. That’s the surest way to undermine the value of using cards to build a business frugally.

Use credit cards right and responsibly, and they will become a steady support for your startup. Remember that, and the rest is easy.

About the Author

Robert McGarvey

Robert McGarvey, a veteran journalist who has long covered startups and small businesses, created and hosts the CU2.0 Podcast for credit union and fintech executives which is at 120 episodes and counting.