For small business owners RewardPay is one of the most useful services for American Express cardholders who want to pay suppliers or superannuation with their credit card.
In short – RewardPay allows you to make payments that would normally be done by bank transfer, but on your points-earning credit card instead. For the privilege, they charge a fee (to the payer, not payee) of 2.4% plus GST for each payment, so you need to be strategic about how you use it to justify the cost.
The cost makes sense if you have a high-points earning card, so we’ve updated this guide to specifically focus on a few examples. There are a few American Express cards and business circumstances where this approach to earning points could work if you’re a business owner.
Disclaimer: We originally wrote about RewardPay in 2016, and this content reflects our personal opinion of the service as a long-time user. RewardPay is now a Point Hacks commercial partner as of April 2017.
I have now been using RewardPay since the middle of 2016, and have put total payments into the tens of thousands of dollars through them, so I have a fair understanding of how the service works and having met some of the team, have some confidence that they working hard to provide a good service for their customers.
A quick intro to RewardPay
RewardPay’s own site is pretty explanatory about why you should use their service – pay your ordinary business expenses for suppliers and other institutions that don’t take credit card (or you’d rather pay by bank transfer due to excessive fees or to improve your cashflow), or for superannuation payments – and earn points. This intro video sums it up well.
There are a few non-points benefits too – primarily that you can use your credit card to improve your business cashflow.
Payment recipients do not need to be registered with RewardPay – but they will see ‘RewardPay’ and your reference number in the payment description in their bank account, so it’s not a completely hidden service to them.
RewardPay’s fees and the Credit Cards that could work best with RewardPay
RewardPay charges a fee of 2.4% of the total transaction, plus GST on that fee. While that surcharge are first glance seems too high to want to use to essentially “purchase points”, if you consider this in more detail and ensure you’re using the right American Express card, it starts becoming an option.
- You are GST registered and you have incoming GST payments to offset against the GST paid to Rewardpay – in which case that “+ GST” component of the fee is moot
- Your business makes a profit, and you have justifiable reasons to use Rewardpay for your business – i.e. to improve cashflow or ease payments to suppliers – in which case the cost may be deductible from your business profit and reduce your tax burden (but check this with your accountant).
In my view, the key to making RewardPay work is an American Express card that can be used for Business Expenses which earns more than 1 point per $, which brings the effective cost per point down.
Why? With a 2.4% payment surcharge on a card which earns the equivalent of 1 frequent flyer point per $, that’s a (before tax reduction calculations are factored in) is a cos per point of 2.4c per point. This is well above my personal threshold for paying to buy points.
However, if you have an American Express with a higher earn rate, this means:
- With a card offering a 2 frequent flyer point per $ earn rate you’re effectively paying 1.2c per point when using RewardPay
- With a card offering a 1.5 frequent flyer point per $ earn rate you’re purchasing points at 1.6c per point
For the next part, you should really consult your accountant (I am not one) to make sure this analysis is correct for you and you don’t have different tax implications.
If you deem the payment fee to be a business expense, and assuming your business is healthy and making profit, and you’re willing to absorb some cost to take advantage of earning points and the cashflow benefits of using Rewardpay, you could consider the out of pocket cost for the points earned to be lower still.
You would be reducing your taxable profit by the amount of the fee (as a cost going out of the business). When tax on company profits is at 30% for larger businesses as it is currently, the $100 fee would result in $30 less tax being paid. For smaller businesses the tax rate is 27.5%.
At the 30% tax rate, deducting Rewardpay as a business expense is equivalent to a 30% reduction in the cost of the points being earned:
- With a 2 point per $ earn rate the net cost is 0.84c per point
- With a 1.5 point per $ earn rate the net cost is 1.12c per point.
What cards could work best with RewardPay
There are several American Express options that earn the equivalent of at least 1.5 frequent flyer points per dollar.
Key cards to consider using with RewardPay
The American Express Business Accelerator offers 2 points per $ on all spend up to $50,000 per year.
American Express Explorer offers the equivalent of 1.5 frequent flyer points per $, uncapped. The Business Explorer does the same with a points bonus if you spend over $100,000 annually.
The Qantas Ultimate American Express offers 1.5 Qantas Point per $, uncapped.
Here’s a longer list of options:
- American Express Business Accelerator – this earns 2 Membership Rewards points per $ on all spend up to $50,000 per year. That’s equivalent to 2 frequent flyer points per $
- The American Express Business Explorer – this earns the equivalent of 1.5 frequent flyer points per $ spent, with an additional 50,000 Membership Rewards point bonus if you spend over $100,000 each year
- Westpac Altitude Business Platinum – this earns 3 Altitude points per $ on the Amex, or 1.5 Velocity points per $ as well has including Qantas Points as a transfer option
- American Express Explorer – this earns 2 Membership Rewards Gateway points per $, which is equivalent to 1.5 frequent flyer points per $ in most partner frequent flyer programs
- Qantas Ultimate American Express – this earns 1.5 Qantas Points per $
It’s also worth considering that, in some cases, you should be careful using a personal card for business expenses however American Express issued cards are fine. Amex consumer card terms and conditions don’t mention any issues around earning points for business transactions.
RewardPay eligible payments
Essentially Rewardpay steps in any time you would usually make a regular EFT / bank transfer to make a payment from your bank account. Payment recipients need:
- An ABN
- An Australian bank account with BSB/Account Number
- A phone number and address
- An email address to send an (optional) payment confirmation to
BPAY doesn’t get involved anywhere, so if a payment recipient only accepts BPAY, you’re out of luck. But I imagine the majority of payees could be used with the service.
How a RewardPay payment works for you and the recipient
RewardPay has an easily understood concept of payees and payments. Payees can be set up and stored for reuse, while payments are made on demand to the stored payees. Payees and payments can be created by hand on the website, or by uploading batch files for larger payment runs.
Payments will take around 3 to 4 business days to hit the recipient’s account, so this isn’t a service to use for last minute or quickly needed payments.
When you go to make a payment to a previously created payee, you can then add payment reference details – one for your own credit card statement, and the other for the recipient’s bank account.
When you make a payment, RewardPay will ask you for your credit card details and SMS you with a confirmation code. Once complete, from the payment confirmation screen you can then download a PDF Invoice for the RewardPay fee and GST.
Worth noting – the PDF invoice only has the RewardPay fee included, but the fee is not charged independently to your credit card. You or your bookkeeper will need to link your supplier’s invoice with each RewardPay invoice to correctly account for the fee that shows in your credit card statement.
The details appear on both statements with “Rewardpay” in front of the details you input. Here’s what it looks like to a recipient in their bank account:
RewardPay is not an option for everyone to start paying every bill they have using the service – it is specifically designed for business to business payments. That said, it will work for businesses of any scale, as long as you have an ABN.
Having used the service for some time and interacted with the team both as a customer, and as owner of Point Hacks, I have confidence in their operations. That said, you should do your own research if you have concerns – do try contacting them with any questions you have.
The key to actually benefiting from the service is to ensure you make the most of the cashflow benefits for not paying bills early, and that you are earning enough points from your American Express card – 1.5 frequent flyer points per $ or more, in my opinion – to make the cost worthwhile.