Payroll By Credit Card | Is It Worth It?

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James Miller
March 4, 2021

Payroll by credit card, specifically American Express, might be a clever way to earn points while paying for your employees. Employees get paid while the employers rack up rewards, but is it worth it?
The question is: Are the fees worth the Aeroplan points? Here are some potential benefits that may outweigh the costs, let's explore different providers offerings.

Payroll by credit card:

Payroll by credit card has emerged as a smart way to earn points while paying for your employees. It's simple -  employees get paid while the employers rack up reward points while incurring a fee on each transaction (2% to 2.75%).

The question is: Are the fees worth the Aeroplan points? Here are some potential benefits that may outweigh the costs:

Return on points.

The most important factor is if there is a return on paying the transaction fee.  A fee of 2.75% on charges is going to reduce the potential gains on most credit card reward points.

Luckily, transaction fees depend on transaction size, and can be reduced to 2% for transactions over $100,000. This will instantly reduce the transaction fee by $750 or 27%. Essentially, on a $100,000 transaction, the transaction fee is $2,000 and the Aeroplan points accumulated amount to 125,000 or 1.6 cents per Aeroplan ($2,000 / 125,000 aeroplan).

Now, what can 125,000 points get you?

The answer: 5 long haul flights in Canada and Continental USA.  Depending on where you fly, the return varies.

For example, the average price of round trips between Vancouver to Toronto is about $550. Multiply that by five, and it will cost $2,750, or a 37.5% return on the transaction fee cost ($750 / $2,000 transaction fee).

Travel first or business class.

A huge benefit to purchasing travel points is the ability to travel first class or business class pretty much at the price of economy. If you are someone that likes to travel in style, this is an affordable method.

What can 125,000 points get you in terms of first or business class? The answer: 2 long haul business class flights and 1 long haul economy class flight in Canada and Continental USA. With the average business class flight costing $3,000, the total cost for the three tickets would be $6,500 or 325% return on the initial $2,000 transaction fee.

Employee rewards.

Businesses who collect points can provide employees incentives such as flights on vacation as a bonus. Rewarding your top employee with a pair of tickets to Las Vegas will add a certain flair to your office culture while likely costing you less than actually paying for them out of pocket.

Extra cash-flow.

Payroll is a big expense, and there are times where a 45 day float can really help with operations. Charging the credit card is a way to obtain short term financing for your payroll.

Is it for your business?

The answer really depends on a few factors.

How big is your payroll? The larger the payroll size, the lower the transaction fees. This will significantly impact the cost per Aeroplan point.

Do you travel at least once a year? If the answer is YES, than you would incur travel related costs already. Paying for your Aeroplan points (1.6 cents) then converting these points to flights may be less expensive than buying your tickets with cash.

To learn more about using Push for your payroll, and whether you will benefit from using your AMEX just book a demo with us and we'll show you all about it!
payroll by credit card


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