With the rise of remote work and “bleisure" travel, it's not unusual for business and pleasure to mix. These days, more people are choosing to combine business trips with leisure travel, with an interest in “workcations" growing. With the work-from-home boom, some employers will reimburse employees for any work-related expenses, such as home office supplies or travel expenses. In addition, many individuals have picked up side gigs for some additional income.
While organizing business and personal expenses can be tricky at times, you can reap the benefits if you have a cash back credit card in your wallet. You'd essentially be putting more money into your pocket without doing any extra work.
What Is a Cash Back Credit Card?
A cash back credit card is a type of credit card that offers you cash as a reward on your spending. How much cash back you'll earn depends on the card. That money doesn't get paid out right away. Instead, the cash back gets put into a “bank," and you can cash it out when you meet a certain threshold.
Many people prefer cash back credit card rewards over travel or points rewards because it's easier to understand and redeem. With cash back rewards, you don't need to worry about blackout dates, redemption charts or having enough points to redeem merchandise. Instead, you're getting cash, which can help you manage your finances.
How Do Cash Back Credit Cards Work?
With cash back credit cards, you get a set percentage back in cash. This can be lucrative for those who use their credit card for business and pleasure.
For example, let's say your employer needed you to charge $1,000 for business expenses to your 2% flat rate cash back card. Your employer would reimburse you the $1,000, but you get to keep the $20 in cash back that you earned. You would have made the purchase either way, but with a cash back credit card, you reap the benefits.
To be clear, you don't need to have a registered business to use a cash back credit card for business purchases. Nor do you need a business credit card. You can use any cash back card for business expenses, as long as you separate them from your regular expenses.
It's worth noting that cash back is only earned on eligible purchases. Some purchases that usually do not qualify for cash back rewards include:1
- • Cash advances
- • Balance transfers
- • Cryptocurrency, foreign currency or any other cash-like transaction
- • Gambling websites
- • Lottery tickets
How Much Cash Back Can You Earn With a Credit Card?
The amount of cash back you can earn with a credit card depends on the specific credit card you have. For example, some cards may offer 3% on office supplies and gas purchases. Alternatively, some cards offer a flat rate of 2% cash back on all purchases.
In addition, some credit cards cap how much cash back you can earn. While this may frustrate some people, if you have the right strategy in mind and utilize your credit cards tactically, you can take advantage of what your cash back cards have to offer. The key thing is to understand how the different earn rates work.
Flat Rate
Flat rate cash back credit cards are the easiest to understand. Regardless of what you're purchasing, you'll get the same amount of cash back.2
For example, the Synchrony Premier World Mastercard® gives you 2% cash back on all purchases with no limit.* Plus, there's no annual fee. For those that often charge business expenses to their credit card, a flat rate cash back card is often the ideal choice. That's because many business expenses don't typically fall into bonus categories.
Bonus Categories
To attract consumers, many credit cards offer additional cash back on specific purchase categories.2
For example, you might earn 3% cash back on supermarkets and online retail purchases. All other purchases would earn you the base earn rate. While there's no denying that these bonus categories are attractive, they only benefit people who do most of their spending in the bonus categories.
Base Earn Rate
The base earn rate applies to any purchases that aren't considered a bonus category. Generally speaking, the base earn rate is usually around 1%.
Rotating Categories
Rotating categories for cash back credit cards can be interesting. Like bonus categories, you earn extra cash back on specific categories. However, these categories rotate every month.2
For example, you might get bonus cash back on gas stations and travel for one quarter, while the next rotating categories may focus on specific retailers. While this can be beneficial, if you're charging business expenses to your credit card, it's hard to time your purchases to take advantage of the extra cash back.
Cash Back Credit Card Rates
The amount of cash back you'll earn depends on which card you have. Generally speaking, you can estimate how much cash back you'll earn based on the type of cash back card you have.
| Type of Cash Back Card |
Range of Cash Back |
| Flat rate3 |
1.5% - 2% |
| Bonus categories4 |
1% - 5% |
| Rotating categories2 |
1% - 8% |
Are There Fees for Cash Back Cards?
Some cash back credit cards do have an annual fee. Generally speaking, the higher the annual fee, the more benefits and cash back you get. That said, there are many no annual fee cash back credit cards that offer a competitive return.
The other fee to consider is interest charges. As long as you pay your entire balance in full and on time, no interest will be charged. However, if you're even a day late on your payment, interest payments kick in right away.
Tips to Increase Cash Rewards
Cash back cards are clearly beneficial, but there are a few ways to increase your rewards.
Maximize Bonus Categories
Since some credit cards give you bonus cash back on different categories, you should try to maximize your business expenses. For example, look for a card that gives you an increased earn rate on office supplies and gas stations since those are common business expenses.
Charge All Business Expenses to Your Card
If your employer will reimburse you for any business expenses, then you should charge as much as you can to your cash back card. You could even volunteer to charge any group office expenses to your card, so you reap the cash back. For those that are self-employed, charging all of your expenses to your cash back card will allow you to earn rewards and organize your finances.
Get More Than One Card
You can increase the number of cash back bonus categories you have access to by applying for multiple cash back credit cards. Try to stick to no annual fee cards which offer extra cash back on the categories you already do most of your spending.
Keep Things Simple
While there's no denying that cash back cards with bonus categories can be lucrative, they require some planning. Instead of tracking your expenses to maximize your cash back, it might be a better idea to focus on a flat rate cash back card.
The Bottom Line: A Cash Back Card Can be Your Business BFF
Cash back credit cards are easy to understand and don't require much effort to earn rewards. If your employer allows you to charge work expenses to your personal credit card, there's no reason why you shouldn't take advantage of the cash rewards. A credit card like the Synchrony Premier World Mastercard® gives you 2% cash back on all purchases with no limits to the rewards you can earn. Since the card has no annual fee, you can easily come out ahead. This card is also ideal for those who are self-employed or have a side hustle as it'll allow them to manage their finances while reaping the rewards.
Barry Choi is an award-winning personal finance expert. He appears regularly on a variety of shows in Canada and the U.S., where he talks about all things money and travel. His work has appeared in major publications, including MSN, Go Banking Rates, The Globe and Mail, The Toronto Star, The Financial Post, and more.
LEARN MORE: Understanding Cash Back on Credit Cards
Sources
1 Melissa Lambarena, July 14, 2022, “How Do Cash-Back Credit Cards Work?" Nerdwallet, https://www.nerdwallet.com/article/credit-cards/how-do-cash-back-credit-cards-work, accessed September 23, 20222Nicole Dieker, May 10, 2022, “How does cash back work" Bank rate, https://www.bankrate.com/finance/credit-cards/how-cash-back-works/, accessed September 23, 2022
3Aaron Broverman, August 23, 2022, "Best flat-rate cash back credit cards," Creditcards.com, https://www.creditcards.com/card-advice/best-flat-rate-cash-back-card/, accessed September 23, 2022
4NerdWallet, September 22, 2022, "13 Best Cash Back Credit Cards of September 2022," NerdWallet, https://www.nerdwallet.com/best/credit-cards/cash-back, accessed September 23, 2022.
* 2% CASHBACK: Valid on net purchases (less credits, returns and adjustments) of goods and services made with your Synchrony Mastercard. Cash back earned will be applied as a statement credit within 2 billing periods after an eligible purchase is made. See Reward Terms for details. NO ANNUAL FEE: For new accounts the Variable Purchase APR will be 16.24%, 22.24% or 29.24%. The APRs are accurate as of October 1, 2022 and will vary with the market based on the Prime Rate (as defined in your credit card agreement). Minimum interest charge is $2.00.
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