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Who can apply for Small Business Credit Cards?

More than likely…YOU CAN.

Yes, that’s right. The odds are in your favor that you qualify for a small business credit card, and probably had no idea. You’re probably thinking, why on earth do I even care? Well…small business credit cards are a great way to earn a lot of points, improve your credit score, segregate expenses, and enjoy additional benefits…which means you can fly like this a whole lot easier.

First off…why do I think you could qualify for a small business credit card?

If you have a side hustle, earn money from the gig economy, or even now what people are referring to as the creator economy…the odds are strongly in your favor that you qualify for a small business credit card.   So many people earn money that isn’t W2 income, but they haven’t established formal LLCs or S-corps that have EIN ( Employer Identification Number), and they aren’t taking advantage of what that income opens the door to….but they can still apply and get approved for small business credit cards.

If you’re earning income on a 1099, you’re good to go. Some examples of those are…

• Online Coaches, tutors, etc
• Uber and Lyft drivers (assuming they still get 1099s whenever you’re reading this).
• DoorDash, GrubHub and Postmates
• Social Media income ( TikTok, Instagram, YouTube )
• Cater Waiters
• Personal Trainers
• Dog Walkers
• Freelance graphic designers and web designers
• Singers, artists, dancers, models, etc
• Virtual Assistants
• Ebay, Amazon and Facebook resellers

Have you done this, Zach?

Yes… in fact, I not only have multiple EINs, I have had multiple Sole Proprietorships over the years. When I first started Monkey Miles I got a credit card as a sole proprietor to segregate the expenses. Then, when I started doing award bookings, I got another one for that specific business. I’ve applied for, and held, a dozen or two small business credit cards over the past several years.

In fact, I still have two Chase Ink Business Preferred credit cards ( got bonuses for both ) that I’ve held for a few years.

Ok, but what are the benefits of a small business credit card?

• More opportunities for welcome offers and sign up bonuses
• Improve your credit score since utilization drops
• Segregate expenses to help come tax season
• Get multiple versions of the same card

Small business credit cards have incredible welcome offers. Let’s say you’re an Uber driver. You spend money on insurance, gas, new phones, cleaning, repairs, wear and tear, etc, etc. All of those expenses could be put toward a sign up bonus, but they also needed to be accounted to help with write offs.  A small business credit card helps keep those expenses separate. If you’re an uber driver and an aspiring content creator, you could have two small business credit cards.

But have you considered all of those expenses are adding to your credit utilization as well?

30% of your score is how much of your debt is used every month. For the most part, small business credit card purchases aren’t reported to your personal credit report ( I list the exceptions below ).

By using a small business credit card to pay for your side hustle expenses, advertising for your foodie blog, or the monthly fee for your blog’s email list, you’re reducing that utilization rate. Let’s say you spend $1500 a month on your side hustle, and you’re putting that on a card with a $10000 limit. If you don’t have any other cards, you’re adding 15% utilization and lowering your score. Adding a small business credit card could quickly boost your score by lowering this percentage.

How do I go about applying for a small business credit card without an EIN?

That’s super easy. You apply as a Sole Proprietor and, depending on the bank, in the section on the application that asks for your EIN ( Employment Indentification Number ) you either enter your social security number, or leave it blank.

What credit do they pull for small business credit cards?

Your credit.

Who is liable for the debt on a small business credit card?

You are.

These aren’t corporate credit cards and if you hold any balance or unpaid debt, you are personally liable for that balance. This is why it’s possible to acquire small business credit cards as a sole proprietor because you’re on the hook for the debt.

Does a small business credit card show up on my credit report?

For the most part, the answer is no which is one of the greatest attributes of a small business credit card.  You can not only get a welcome offer or sign up bonus, but the spend your put on the card doesn’t affect your credit utiliziation.

Banks that do not report the account or balance to your personal credit report

• Amex
• Chase
• Citi
• Barclay
• Bank of America 

Banks that do report the card to your personal credit report and the expenses that are put on it.

• Capital One does report to your personal with the exception of the following cards
  • Spark Cash Plus ( if you open now…prior to 2020 these did report )
  • Spark Miles Elite
• Discover does report the new card and the balance to personal report
• Wells Fargo has been known to report on occasion

Do small business credit cards affect my Chase 5/24 number?

If you’re unfamiliar with 5/24, Chase has a rule that they will not approve you for any new accounts if you have opened 5 or more cards in the past 24 months. Specifically they count the number of new accounts added to your personal credit report.

The answer is Yes and no. If the account is added to your personal credit report, then yes, it would affect that number. Otherwise, no, this is an effective strategy of adding another card to your wallet, enjoying the welcome offer, added benefits, etc all the while keeping your 5/24 number the same.

As you can see… I have 10 American Express cards, but only 2 of them show up on my credit report. The other 8 are small business credit cards whose monthly spend stays off my personal report helping to keep my utilization lower, and don’t count against my 5/24 number.

How do I fill out the income section on a small business credit card?

There are two sections for income: Personal and Business. Answer both truthfully.

Let’s say you just started selling a course on Teachable or Kajabi and you’re going to spend money marketing it and want to segregate those expenses. You aren’t really sure if it’ll be successful so you haven’t incorporated it just quite yet. You think you’ll earn a couple grand a month and also spend that trying to push sales. I’d probably fill out the application like this.

Jump to Our Current Favorite Business Cards

Recap

Small Business Credit Cards are a great way to lower your utilization to get your score higher, enjoy more benefits and bonuses, and they help segregate expenses to help you come tax time.

Any questions? Feel free to drop one in the comment section!