Business credit cards offer unique perks that you don’t necessarily get with a personal credit card, like bigger sign-up bonuses and special rewards categories. But if you’re self-employed as an independent contractor, freelancer, or just have the occasional side hustle, can you get a business card?
In most cases, the answer is yes. To be approved for a business credit card, you must be earning some income independently. Here’s what you need to know about applying for a business credit card if you don’t run a traditional business.
Business Credit Card Eligibility Requirements
You may be more entrepreneurial than you realize. Any business that generates revenue can be considered a legitimate business that qualifies for a business credit card. Some common non-traditional business examples include:
- Run a dog walking business in your neighborhood
- Buying and Selling on eBay
- Work as a Virtual Assistant
- Drive for ride-sharing apps like Uber and Lyft
- Owning and leasing rental properties
- Food delivery through app-based companies like DoorDash and Grubhub
- Teach your child in person or online
- Buying and Selling Antiques
- Independent Consulting Services
- Sell your handmade goods at markets or online (such as Etsy or Facebook Marketplace)
- Work as an entertainer
- Freelance Writing and Editing
- Website construction
- Social Media Site Management
This means that if you earn income from your job, you may be able to qualify for a business credit card. You don’t have to be a registered LLC or corporation to apply for a business credit card. If there’s a section on your credit card application that asks for your “business tax ID number,” you can list yourself as a sole proprietor and enter your Social Security number instead of your tax ID number.
Business Credit Card Requirements
If you have a registered business, such as an LLC, you’ll apply for a new business credit card using your business information. This includes using your federal tax ID number, also known as your Employer Identification Number (EIN). If you’re running your business without a formal business setup, you can apply as a sole proprietor using your Social Security number instead.
In either case, please be prepared to provide the following information*:
- The official name of your company and the name you want to appear on the card (if you are a sole proprietor, you can just use your name)
- Annual business income
- Monthly business expenses
- Years since establishment
- The industry your business belongs to
- Business structure (e.g. LLC vs. corporation vs. sole proprietorship)
- Your role in the company
- Number of employees (if any)
- Whether it’s your home address or your work address
- A business number, even if it’s a personal phone
*Please note that your credit card issuer may not require all of this information at the time of application.
For some cards, you may have to mail in proof that you’re a business, which might include information from the IRS verifying your tax ID number or income information, but in most cases, you’ll receive an approval notice within seconds of applying online.
Can I get a business card even if I don’t have any business income?
Yes, you can get a business card even if your business hasn’t generated any revenue yet. Issuers understand that a new business may not have any business revenue yet, so if you’re just starting out and haven’t generated any revenue, be honest about it. That being said, even if you think your income is small (for example, if you only sold a few hundred dollars’ worth of products), you should still list that income on your application.
Remember, getting approved for a business credit card isn’t as hard as you think. Many activities qualify as a small business. If you regularly perform a service or sell products at a profit and can prove you have both revenue and expenses, you could qualify for a business credit card. Small businesses include anything from running an active Etsy store to driving for a rideshare company.
Why get a business credit card instead of a personal credit card?
There are many reasons why you might want to get a business credit card for your business, including:
Remuneration for expenses
Some of your business-related expenses may earn you travel rewards or cash back. For example, if you’re a rideshare or delivery driver, you may need to pay for your own gas, as well as vehicle maintenance and repairs. If you sell crafts or art, you probably need to buy supplies.
No matter what the cost, if your card has a rewards program, you can earn cash, points, or miles. If the account offers a sign-up bonus to new cardholders, you may be able to earn additional rewards by meeting minimum spending requirements within the first few months of opening the account.
Keep personal and business expenses separate
Keeping your business and personal credit cards separate will help you stay organized. Not only will you be able to better control your spending, but having all your expenses on a business credit card will help you when it’s time to reconcile your books and pay your taxes.
Build your business credit score
While your personal credit score is taken into consideration when applying for a business credit card, your business credit history is built when your credit card issuer provides your data to the three major commercial credit reporting bureaus: Dun & Bradstreet, Equifax, and Experian.
Keeping your accounts in good standing will improve your business credit score over time, making you more eligible for other business credit products in the future.
Business Benefits
Many of the major business credit cards offer special perks like cell phone insurance or cash credit for business-related products and services, so getting the right card for your business can be beneficial.
Can I use my business credit card for personal expenses?
While it’s not illegal to use a business credit card for personal expenses, it could violate the terms of your card agreement and subject you to penalties. Possible consequences include:
- Closing your account: You’ll probably have to sign a contract pledging not to use your business credit card for personal payments, and the contract may state that the issuer can cancel your card if you violate these terms.
- Personal responsibility: Commingling your personal and business finances can leave you personally liable for business debts if you get into legal trouble. It’s also possible that a court may ignore the separation between you and the business and hold you personally liable for business obligations.
- Tax impact: Business credit cards typically have higher fees and interest rates than personal cards. However, these higher costs often come with benefits. Most interest and fees incurred on business transactions are tax-deductible along with business-related expenses. Conversely, personal purchases don’t benefit from this tax deduction, so there’s no monetary benefit. So using a business credit card for personal expenses and carrying a balance can end up costing you more in the long run.
- Impact on both business and personal credit scores: While it may be tempting to use a business credit card for personal transactions to boost your consumer credit score, it probably won’t help. Most business credit cards only report positive card activity to the business credit bureaus, so responsible business credit card habits are unlikely to be reflected in your consumer credit score. However, issuers may report negative business card activity to the personal credit bureaus, so your personal credit score could be adversely affected.
- Limited consumer protection: When you use a business credit card instead of a personal credit card, you may lose certain legal protections that you enjoy when using a consumer card, such as protection against sudden interest rate increases without prior notice, prohibitions against interest rate increases on unpaid balances, prohibitions against charging interest on debts that are paid on time, and payment priority for balances with the highest interest rates.
If you accidentally charge a personal expense to a business card, notify your accountant or bookkeeper and mark the transaction to remove it from your company’s financial records.
What to look out for with business credit cards
Although business credit cards have many benefits, they also have some potential drawbacks. Often, the business credit cards with the most perks come with hefty annual fees. For example, the Business Platinum Card® from American Express has a hefty annual fee of $695. However, if you’re not sure how often you’ll be charging purchases to your card or whether you’ll actually use the perks, you might consider a business credit card with no annual fee.
Before you apply for a card, consider the pros and cons of some of the best business credit cards to determine which card will best suit your business needs, whether your work involves road trips, creative work, e-commerce, air travel, and more.
Of course, any cards you get need to be treated properly, and managing them takes time and care. No matter the size of your business, it’s best to maintain low balances to keep fees from eating into your revenue, and to always pay your monthly bills on time to protect your business’ credit rating.
Conclusion
Business credit cards offer business owners more perks and better rewards for business-related expenses. They also tend to offer higher welcome bonuses and can help businesses build their own credit scores. Most importantly, using a business credit card for legitimate business expenses makes it easier to separate your business and personal finances.
Although you must be running a legitimate business to be approved, getting a business credit card isn’t as hard as you might think. Many small business ideas and side hustles can help you get a business credit card.
With numerous benefits and perks, a business credit card may be exactly what you need to make your work more efficient and profitable while controlling costs. Whether your business is casual part-time work or full-time freelancing, choosing the right business credit card can help you stay on track and move forward.
