I’ve been a card member for twelve years or so and I’ve always appreciated Amex’s customer service and card offerings. A couple years ago, I switched to One from American Express for my personal expenses. The rewards are straight-forward. One percent of your purchases will be deposited to a high yield savings account at the end of your billing cycle. Last year that amounted to a few thousand dollars in savings on purchases plus the interest earned on those savings. High yield in 2007 meant 5% for most of the year. Unfortunately, it’s only 2.75% now. Another great feature is interest protection. You only pay interest if you carry a balance. Pay your balance in full and you do not incur any interest charges.
The only downside to American Express is that there are still quite a few businesses that don’t take it. The good news is that it’s mainly small retailers. American Express has been quick to remind merchants that on average, card members spend much more than their Visa or MasterCard carrying equivalents and thus, more and more merchants have offered Amex as a payment option over the past couple of years.
For business, I use the Simply Cash Business Card. The card features 5% cash back on gas, office supplies and wireless and 1% on everything else. The cash back is credited to your statement at the end of each month.
How does Amex fit into all this? Well, I bring it up because their rewards are one small way to slightly enhance your ROI for the better on both the advertising and publishing sides of your Internet marketing endeavors. The success of many campaigns hinges on small margins. For a contemporary analog, think of black jack. If you play it perfectly, you can attain a 1% advantage over the house. Credit card rewards that are cash-based offer a similar edge and if you don’t play it perfect, you’ll lose your advantage. I know it’s small, but in the world of analysis even the fractions count.
While credit cards can be a great way to help fund your marketing campaigns, you have to take cash flow into consideration. If you carry a balance, you have to factor the interest you pay into your ROI. This is especially true where you might have as much as a sixty day wait for payments. If you look at the super affiliates, they are able to leverage more frequent payments because of the size of the commissions they earn on a monthly basis. If you’re starting out, you don’t have any leverage at all. Be sure to understand exactly when you can expect to be paid for your PPC/PPA campaigns and manage your cash in such a way that you pay your card balances in full each month.
On the marketing side, it’s also important to remember that if you’re running PPC/PPA ads, you’re likely funding your account based on your future spending. Commission Junction is one example. They require you to maintain a balance equal to what they project you will spend in the next 30 days. They even provide you with monthly report that tells you exactly where your prepaid-paid balance needs to be. For PPC campaigns, expect many frequent charges and monitor your spending closely. This is especially true for any new campaigns that you’ve launched.
As you track your campaigns’ ROI, you have to factor in how much your advertising actually costs — including interest charges and any cash back rewards you may earn. My advice is to carefully consider which rewards your credit card offers and lean towards cash rewards.
Here’s a quick and dirty example for illustration:
You spend $1,000 to earn $2,000 on your current campaign. You receive a 1% discount on your spend making your actual spend $990. Instead of a 100% return, you yield a 102% return. Now, what happens if you have to pay interest? At 12%, that would precisely offset your cash back. At 14%, you’d pay $1,001.67 to earn $2k and your return would be 99.67%. Pay the minimum and continue to carry your balance forward and you can easily see how doing so will erode your ROI.
Pretty neat huh? While I know few people enjoy math, I do know that we all want to maximize our returns. Considering every factor including your actual cost of capital in your campaigns can really pay off in the long term.
What rewards card do you use and why? Have you seen any similar advice as the above? Share your experiences in the comments below!
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