No. of Recommendations: 0
1) Tax-free income from a credit card?

2) Increase your net worth, just by changing the way you pay your bills?

3) Don't interest charges eat-up any income benefits?

4) Why are you giving your bank account number, where you bank, and a copy of your signature to strangers?

5) Could employee debit cards could sink your business?
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1) Yes, income from a cash-back card is considered a rebate, not income, by the IRS.

2) On the face of it, of course, getting cash-back for purchases can increase your personal and/or business net worth...but, by how much? Personally, if you pay $3,000/mo. in bills, that could be paid by a cash-back credit card, that's $360/yr. in tax-free income (assuming 1% cash-back). For businesses, if you pay $10,000/mo. in bills, it's $1,200/yr. in tax-free income - just by switching from paying with a check/debit card to a cash-back card.

3) Yes, if you don't pay-off the card monthly. Find a cash-back card that has a 30-day grace period, then pay-off that card, monthly. Presto, no interest charges! This only works if you treat the cash-back like a debit card and pay-off the balance every month. Also, make sure there are no annual fees.

4) You give your account number, where you bank, and a copy of your signature to strangers, every time you write a check. Should fraud occur and someone writes a check against your account, you'll probably get your money back. However, it may take days or weeks, before the missing funds are replaced. In the meantime, you've got rent, mortgage, car payment, etc. to make. On the other hand, if you use a credit card for purchases and periodically check your card statement, you can catch the fraud before any funds are deducted from your account. Headache...avoided.

5) Yes, employee debit card misuse could sink your business. As in the answer above, missing funds could cause problems that spiral out of your control. The solution is to use a business credit card that does not hold you accountable for employee misuse. For example, 2 employees buy a Disney vacation for $1,000, with their company-issued cards. One uses an company debit card and the other a company credit card. Both employees are terminated. The owner of the debit card spends weeks trying to collect the $1,000. The owner of the credit card calls the card company, disavows the $1,000 expense, and the debt is removed from the balance.

So, in summary, cash-back credit cards could provide a boost to your bottom-line and give you fraud protection, if you use them wisely.

Generally, look for a card that offers these attributes:

- No annual fee.
- Cash-back on every purchase.
- 30-day grace period.
- No owner liability for employee misuse, (for business credit cards) if employee is terminated.


Thanks,

Richard
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No. of Recommendations: 4
Yes, employee debit card misuse could sink your business. As in the answer above, missing funds could cause problems that spiral out of your control. The solution is to use a business credit card that does not hold you accountable for employee misuse. For example, 2 employees buy a Disney vacation for $1,000, with their company-issued cards. One uses an company debit card and the other a company credit card. Both employees are terminated. The owner of the debit card spends weeks trying to collect the $1,000. The owner of the credit card calls the card company, disavows the $1,000 expense, and the debt is removed from the balance.

Really? Can you show some terms and conditions in the contracts where credit card companies would be agreeable to removing charges like this made by an employee who was authorized to make charges, unless they could hold the employee responsible for the charges? Or cite cases where this has happened? Unless credit card company can collect from the person who made the charges, the credit card company has no reason to just remove the charges from the account, since someone who was authorized by the business owner to do so made the charges. The owner of an account is liable for charges made by the authorized users. The fact that the authorized user/employee used the card outside of the rules that were set for them by the owner/company doesn't absolve the owner of the account of the responsibility for paying the credit card company, since the credit card company has no say in the rules, and no way to enforce those rules. That's a dispute between the employee and the business owner. (The same thing is true of personal cards that have authorized users.)

If there were limits set (like no travel charges allowed on the card) and the credit card company didn't follow those rules, then the credit card company would be responsible. But the scenario that you painted seemed to indicate that there weren't any restrictions on the accounts, since both employees were able to make the charges.

No owner liability for employee misuse, (for business credit cards) if employee is terminated.

And where do you find a card that doesn't hold the business owner responsible? The credit card company wants their money and they don't care that the employee broke company rules, even if the employee is terminated, unless the credit card company had agreed to enforcing those rules and failed to do so. Otherwise, it becomes a dispute between the (former) employee and the business owner, not a dispute between the (former) employee and the credit card company.

AJ
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Hi AJ,

Yes, such card benefits do exist.

If you are a business owner and you're considering issuing company credit cards to your employees, ask the credit card company if they will waive unauthorized charges, made by an employee, if the employee is terminated.

There are probably several card companies which will do this, but the one I know will do this is the business credit card issued by Bank of America.

The rule is plain and simple: If an employee makes an unauthorized purchase, with a company-issued credit card, the business owner will not be responsible for that charge, as long as the employee is terminated. The card company will then seek to collect the amount charged, from the now-terminated employee, or that employee could face criminal/civil prosecution.

Also, note that many card companies will allow the business owner to establish a credit limit, for individual employees, at or below the limit approved for the company credit card. So, for example, if the company credit card is approved for a $50,000 limit, the owner could set the employee card limit at $3,000, $5,000, etc.


Regards,

Richard
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2) On the face of it, of course, getting cash-back for purchases can increase your personal and/or business net worth...but, by how much? Personally, if you pay $3,000/mo. in bills, that could be paid by a cash-back credit card, that's $360/yr. in tax-free income (assuming 1% cash-back). For businesses, if you pay $10,000/mo. in bills, it's $1,200/yr. in tax-free income - just by switching from paying with a check/debit card to a cash-back card.


Dude, I get $12,200 in tax free income from owning 1000 shares ($12.20/share( of Apple and being in the 15% marginal tax bracket.

Not only, that, but when I bought the shares back in '99, I paid less than $10/share.

So which do I prefer, 1% annual cash back or 122% annual cash back (not to mention a 5,000%+ increase in capital)? You do the math.

Incidentally, the 122% annual cash back will no doubt increase in the coming years. Try that with a cash back card.

Churchy
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No. of Recommendations: 7
Hi Churchy,

Please take your time rereading my posts, because you misunderstood them. My postings were intended for those who use debit cards or write checks to pay expenses, not investment comparisons.

All things being equal, if you use a debit card to pay for $10,000/mo. in expenses; whereas, I use a cash-back credit card to pay for $10,000/mo. in expenses, I'll be $1,200 richer than you, at the end of the year. (Assuming the cash-back credit card pays 1% on every purchase, has a 30-day grace period to allow monthly balance pay-offs with no interest charged, and no annual fee.)

There, now you can afford to buy a couple of extra shares of Apple, a year from now.

Richard
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