Unlocking the Power of Business Credit Cards: A Comprehensive Guide for Nontraditional Business Owners

At O1ne Mortgage, we understand the importance of financial education and empowerment. Whether you’re a seasoned entrepreneur or just starting your side hustle, having the right financial tools can make all the difference. One such tool is a business credit card. In this comprehensive guide, we’ll explore the ins and outs of business credit cards, their benefits, and how you can leverage them to grow your business. And remember, for any mortgage service needs, don’t hesitate to call us at 213-732-3074.

Can I Apply for a Business Credit Card Without a Traditional Business?

Absolutely! You don’t need to own a major corporation or a chain of restaurants to qualify for a business credit card. Many nontraditional business ventures can also benefit from having a business credit card. Here are a few examples:

• Reselling items online on platforms like Depop, Etsy, Poshmark, or Facebook Marketplace.
• House sitting, babysitting, or pet sitting.
• Rideshare or food delivery driving.
• Renting properties on sites like Airbnb or VRBO.
• Leasing apartments or homes as a property owner.
• Freelance writing or editing.
• Business consulting.
• Tutoring, teaching, or training.
• Building websites.
• Operating a food truck or food cart.

Business Credit Card Requirements

To apply for a business credit card, you’ll need to provide some basic information about yourself and your business. This typically includes:

• Personal Information: Full name, address, Social Security number, and annual income.
• Business Information: Business name, address, phone number, industry, business structure, your role in the business, years in business, number of employees, annual business revenue, and estimated monthly expenses.
• Tax Information: Federal tax ID number (Employer Identification Number for corporations and partnerships, Social Security number for sole proprietors).

Checking Your Personal Credit

Unless you’re applying for a corporate card in the name of your business, your card issuer will likely check your personal credit. This is good news for businesses that haven’t established much (or any) business credit. A higher personal credit score typically qualifies you for lower interest rates and better terms.

Benefits of Getting a Business Credit Card

Using a business credit card for business expenses has several distinct advantages:

1. Establish Business Credit: A business credit card can help you build your business credit score, which is crucial if you want to secure business loans or financing in the future. Ensure your card issuer reports to a business credit bureau like Experian, Dun & Bradstreet, or Equifax.
2. Streamline Accounting: A dedicated business card makes it easier to track business expenses for bookkeeping and tax reporting. Some business cards even categorize spending for you.
3. Separate Business and Personal Finances: Maintaining separate business and personal finances is key for corporations and partnerships. As a sole proprietor, this helps demonstrate to the IRS that you are a legitimate business.
4. Finance Inventory and Expenses: A credit card is useful for financing large purchases or managing cash flow, especially if you purchase goods or services for clients and get paid back later.
5. Pay Securely: Credit cards are a convenient and secure way to pay for large purchases or online transactions. You can also set up cards with spending limits for your employees.

How to Choose a Business Credit Card

Choosing a business credit card is similar to choosing a personal credit card. Here are some questions to help you make the right choice:

Does Your Business Qualify for the Card?

Business credit cards may be geared toward major corporations or smaller enterprises. Look for a small business credit card that caters to your size and style of business. Also, consider the credit requirements. Many business credit cards require excellent personal credit, but you can find options for good credit or secured cards for new business owners.

How Will You Use a Business Credit Card?

If you plan to use a business credit card for major purchases, look for a card with a high credit limit and favorable interest rates. If you only intend to use it for minor expenses, consider a card with low fees.

What Are the Fees and Costs?

Business credit cards typically charge annual fees, transaction fees, and late fees. Review these charges before signing your card agreement. Business cards also tend to have higher annual percentage rates (APRs) than personal credit cards, so compare rates carefully.

What Are the Rewards and Benefits?

Many business credit cards offer rewards, cash back, or 0% promotional rates on purchases or balance transfers. If you’re an active card user, these benefits can add up. Look for perks like free additional cards for employees or waived foreign transaction fees.

Can You Use a Business Credit Card for Personal Expenses?

While it’s not illegal to use a business credit card for personal expenses, many business cards state in their terms and conditions that they’re for business expenses only. Using a business card for personal spending can violate this agreement and potentially lead to account cancellation. Additionally, mixing personal and business expenses defeats the purpose of having a business credit card.

The Bottom Line

Even if your business is small, having a business credit card can be incredibly beneficial. It allows you to make large transactions, finance equipment or inventory, manage cash flow, and establish business credit. If you’re in the market for a business credit card, start by checking your credit report and score. From there, choose the card with the most competitive interest rate, fees, and benefits.

At O1ne Mortgage, we’re committed to helping you achieve your financial goals. For any mortgage service needs, call us at 213-732-3074. Let us help you take your business to the next level!