Rewards credit cards offer their users incentives simply for using their card. In many cases, these rewards come in the form of airline miles or discounts on merchandise. Many rewards cards also offer cash back just for using the card!

Credit card companies often run on tight profit margins, so percentage wise, the cash back amount is usually quite small – around 1% – but 1% off is still better than nothing! Credit card companies take in lots of money from interest payments, so they can afford to reward smart credit card users by offering them a slight rebate.

If you’re a consumer, getting 1% back on your money is merely a nice convenience. Imagine purchasing a $3,000 TV for the Super Bowl, and getting $30 back to spend on snacks and food. Or buy a $20,000 car and get enough money back to fill it up a couple of times.

However, if you own a business, rewards credit cards can be a very powerful tool for increasing your profit margins. As a business owner, your two goals are to increase revenues and decrease expenses – and if you can find a way to do either one of those things (depending on how you look at it) without any additional effort on your part, why not take advantage of it?

Rewards credit cards can work very well if your business runs on a tight profit margin. Let’s say that in one month, your revenues are $50,000, and your expenses are $45,000, leaving a $5,000 profit – a margin of 10%. If you charged $45,000 on a 1% rewards card, and paid the whole bill off, you would receive a $450 rebate, which increases your profits to $5,450 – up to a margin of 10.9%. However, this represents a 9% increase from the original basis of 10%!

What if your business manages to break even on $50,000 revenues/expenses? Pay off the $50,000 and you’ve turned your break even point into a $500 profit without having to do anything!

It goes without saying that the most important thing to do is to pay off your credit card bill in full. If you let interest accumulate, you can negate the effects of any cash back received. It’s literally free money from the credit card companies – why spend it on interest?