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Understanding Business Credit Cards: A Guide by O1ne Mortgage
At O1ne Mortgage, we prioritize consumer credit and finance education. This post aims to provide an objective view to help you make the best decisions regarding business credit cards. For any mortgage service needs, feel free to call us at 213-732-3074.
Can I Apply for a Business Credit Card Without a Business?
You can apply for a business credit card even if you don’t own a major corporation. Depending on individual card requirements, you can apply for a business credit card even if your venture is a sole proprietorship, side hustle, or home-based business. Here are a few examples of nontraditional businesses that generally qualify for a business credit card:
- Reselling items online on sites 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 basic information about yourself and your business. Be prepared to provide the following information:
- Business name, address, and phone number
- Industry
- Business structure (corporation, partnership, LLC, nonprofit, or sole proprietorship)
- Your role in the business
- Years in business
- Number of employees (if any)
- Annual business revenue
- Estimated monthly expenses
- 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. For businesses that haven’t established much business credit, this might be good news. A higher 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 distinct advantages:
- Establish Business Credit: A business credit card can help you build your business credit score, which is helpful if you want to secure business loans or financing in the future.
- Streamline Accounting: Using a dedicated business card makes it easier to track business expenses for bookkeeping and tax reporting.
- Separate Business and Personal Finances: Maintaining separate business and personal finances is key for corporations and partnerships.
- Finance Inventory and Expenses: Having a credit card helps when you have large purchases to finance or need to manage cash flow.
- Pay Securely: Credit cards are a convenient and secure way to pay when making large purchases or doing transactions online.
How to Choose a Business Credit Card
Choosing a business credit card is similar to choosing a personal credit card. Consider the following questions to help you make the best choice:
Does Your Business Qualify for the Card?
Look for a small business credit card you qualify for, one that caters to your size and style of business. Many business credit cards require excellent personal credit, although you can find business cards for applicants with good credit as well as secured cards for business owners just starting out.
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 an ample credit limit and the most favorable interest rate. If you only intend to use your card for minor expenses, consider shopping for 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. Also, business cards tend to have higher annual percentage rates (APRs) than personal credit cards.
What Are the Rewards and Benefits?
Many business credit cards offer rewards, cash back, or 0% promotional rates on purchases or balance transfers. Look for potentially useful perks, such as free additional cards for your employees or waived foreign transaction fees.
Can You Use a Business Credit Card for Personal Expenses?
While it isn’t illegal to use a business credit card for personal expenses, many business cards state in their terms and conditions that they’re to be used for business expenses only. Using a business card to pay for and finance personal expenses is technically a violation of this agreement.
The Bottom Line
Even if your business is small, having a business credit card to make large transactions, finance equipment or inventory, smooth out your cash flow, and establish business credit may be worthwhile. For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you make the best financial decisions for your business.
