Is a small business credit card a good option for you and your side hustle?
Whether you’re looking for a way to separate your business and personal finances, or need a line of credit to cover startup costs, this post has you covered.
Before you apply, let’s take a look at:
- how business credit cards work
- the pros and cons of getting a business credit card
- the best small business cards to consider
No Interest Business Credit Cards?
Yes, the exist. In fact, I’ve got a wallet full of them.
What’s the secret to getting banks to give you a 0% interest rate? Just pay your balance in full every month.
Don’t spend money you don’t have. Credit cards are a tool to help your business, not dig yourself into a debt hole you spend years trying to climb out of.
Most cards carry incredibly high interest rates. Consider them a funding “strategy” of last resort when starting your business.
What if I Haven’t Made Money Yet? What if I’m Starting a New Business?
Even if you’re starting a new side hustle and have made no money yet, you qualify for a small business credit card. Banks understand that many new businesses don’t show revenue for a while — and for better or worse, are often happy to lend you money to cover startup costs.
You don’t have to be a large corporation or an entity that already has money in the bank. You do, however, have to be able to list what your business or side hustle does.
If you ever do freelance work, sell stuff on Ebay, run a blog, participate in the gig economy, or do tutoring, all of those could count as a business. Even hobbyists that sell at craft shows qualify for small business credit cards.
Simply put, if you plan on making a profit and you have good credit, you’ll most likely qualify. The age of your business has nothing to do with the decision.
What are the Requirements for a Business Credit Card?
What else is required to apply for a business credit card? If you’ve started your side hustle, or are planning to start one, you’re already half-way there.
A typical application will ask for:
- The name of your business. This does not need to be anything “officially” registered. For example, if I’m a freelancer, I could just put Nick Loper Enterprises.
- The name you want on the card.
- Where your business is located. If you’re working from, this will just be your home address. It won’t be shown publicly.
- Your phone number.
Next up, the application will probably ask about:
- The estimated annual revenue of the business. Again, OK if it’s zero at the moment.
- The legal structure of your business. If you haven’t incorporated, you’ll select the “Sole Proprietorship” or “Self-Employed” option.
- Your Tax ID number. If you haven’t incorporated yet, your social security number is your Tax ID.
If you’ve registered your company as a limited liability company (LLC) or another entity, you may have an Employer Identification Number (EIN) to use as your Tax ID.
(An EIN isn’t required, but they are free to get through IRS.gov, and you may need one to open a business bank account.)
The application may also ask:
- what line of business you’re in
- what goods or services you offer
- how much you plan on spending
- how long you’ve been in business
Just answer the application as truthfully and as accurately as possible.
Will I Qualify for a Small Business Credit Card as a Sole Proprietor?
Absolutely! And honestly, it’s not as intimidating as you might think. As long as you intend on making a profit and have good credit, you should qualify. It doesn’t matter if you’re a dog walker, babysitter, or a delivery person.
However, you will have to use your personal information to apply for the card. (That means you can’t be late on payments, because your personal credit score will take a hit.)
Wait, Why Do They Need My Social Security Number?
If you are applying for a business credit card as sole proprietor, you will need to use your social security number.
(And I’ve found even when applying on behalf of an incorporation, the application still requires my social.)
This news can be surprising, especially if you’re getting the business credit card to keep your personal and business finances separate. However, the bank is taking a risk on you, so they want to check your credit history to make sure you’re a safe bet.
If you’re an non-resident without a social security number you can apply for an individual taxpayer identification number (ITIN) here. But just as a heads up, not all banks accept the ITIN.
What If I Don’t Want to Provide my Social Security Number?
I have to be honest; it’s hard to get approved for a small business card without your social security number unless you own a large corporation.
While some banks don’t require it, most do. You may have to look into other forms of funding your venture. Some other avenues could include crowdfunding, microloans, or investors.
7 Small Business Credit Card Advantages
What are the biggest advantages of getting a dedicated business credit card for your side hustle?
1. Separating Business from Personal Finances
Keeping your business finances separate from your personal finances is incredibly important.
Tracking what you spend becomes easier if it’s being spent from the same credit card, especially when you’re reconciling everything during tax season.
In fact, many credit card companies make it easy to download a full year’s worth of records at one time. Some cards even give you the ability to download your yearly records directly into your accounting software.
2. Buying Power
When you’re just starting out, you may not have the money to purchase everything you need to be successful.
A business credit card you can have the buying power you need early on. That credit line could be used to purchase initial inventory, pay for equipment, or marketing expenses. The old phrase “it takes money to make money” still has some truth to it.
3. Tax Deductible Interest
While I don’t recommend taking on debt to start your business, there is a silver lining in the tax code. The interest you pay on business credit cards is tax deductible.
However, to qualify, each and every purchase must be a true business expense. Make sure to check out the IRS website to see what qualifies as a business expense.
4. Build your Company’s Credit
A small business credit card can set up your small company or side hustle with a good credit track record, which will help you get larger loans in the future, if necessary.
5. Cushion for when Clients Miss Payment Deadlines
There will be those clients who never pay on time. When you’re first starting out, this can really hurt your business.
A small business credit card allows you to keep your business moving until that client pays you. And with the low annual percentage rates currently available, this isn’t something that should keep you up at night.
Just make sure to pay the credit card bill immediately after your client pays you.
6. An Easier Tax Season
Let’s be honest. The word audit sends chills down all of our backs.
But, if you have clean records from your credit card provider, instead of a shoebox full of wrinkled receipts, everything will be easier for not just you, but for the IRS worker as well. They may even thank you for being organized and well-prepared.
Do you like free money? I sure do.
Business credit cards can earn rewards in the same way personal credit cards do. However, the rewards and incentives can be even better.
With each purchase, you could earn points for travel, office supplies, and cash back. Some even come with large signup bonuses. Rewards usually come in two flavors:
- Travel rewards
- Cash back
Specific cards can rack up travel rewards and elite status quickly at your favorite airlines or hotel chains. Others, have their own redemption portals where points and miles can be used across a variety of travel experiences.
Still, if your side hustle includes travel, or you love traveling in your free time, a travel rewards card may be the way to go.
On the cash back front, most business cards will pay you 1-5% cash back on your purchases, depending on the card and what you’re buying.
If you envision spending a lot of money on inventory, advertising, or other expenses, it’s worthwhile to see which cards have the best perks for your business.
Disadvantages of a Business Credit Card for Side Hustlers
While there are many advantages of a small business credit card for side hustlers and gig workers, there are some disadvantages you should be aware of.
- The Credit Card Accountability Responsibility and Disclosure Act of 2009 doesn’t protect business card holders as much as it does personal card holders. If you find that you may carry a balance, using a personal card may suit your needs better. Make sure to read all of the small print before applying for a card.
- Business credit cards sometimes have higher interest rates compared to other types of loans.
- As mentioned above, if you’re a sole proprietor with a small business card, it can affect your personal credit score.
Small Business Credit Card Recommendations
If you don’t anticipate a ton of business expenses, look for a rewards card with no annual fee. CardRatings.com keeps an updated list of the best business cards.
The Best Business Cash Back Card
My go-to recommendation for new side hustlers is the popular Chase Ink Business Cash® Credit Card.
There’s no annual fee, a $900 sign-up bonus after you spend $6,000 in the first 3 months, and you earn 5% cash back on the first $25,000 you spend at office supply stores and on Internet, cable and phone services each year.
Another Great Cash Back Card
The Chase Ink Business Unlimited® Credit Card is another great cash back option. To start, you’ll earn a $900 signup bonus when you spend $6,000 in your first 3 months.
After that, you’ll earn a flat 1.5% cash back on all your business purchases.
And there’s no annual fee.
The Big Sign-Up Bonus Business Credit Card
If you anticipate a lot of near-term expenses, the Chase Ink Business Preferred® Credit Card is worth a look. You can earn 100,000 points (worth $1250) when you spend $8,000 in purchases within the first three months.
Ink Business Preferred also earns up to 3% cash back on your everyday business purchases.
This one has a $95 annual fee.
Small Business Credit Card with 0% APR
The American Express Blue Business CashTM Card gives you a 0% APR on all purchases for the first twelve months. (Regular APR 18.49% – 26.49%.)
As a bonus, there is also no annual fee.
This card also earns 2% cash back on your first $50,000 in qualified spending every year, then 1%.
Term apply, see rates and fees.
I believe the benefits of applying for a small business credit card for your side hustle far outweigh the negatives. Consider your options and the needs of your business, get approved, and get back to work!