You don't need a company with several employees to qualify for a business credit card - even side gigs like driving for Uber can count

Caroline Lupini

Nov 3, 2019, 19:07 IST

You don't need a company with several employees to qualify for a business credit card - even side gigs like driving for Uber can count

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If you don't have a traditional business, you might not realize that you still may be able to get a business credit card.
Since business credit cards like the Capital One® Spark® Miles for Business and Ink Business Preferred Credit Card often have large welcome bonuses and good benefits, you won't want to ignore them if you are eligible.
Here's how to figure out if you can qualify for a business credit card.
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It may be surprising to hear, but it's entirely possible that you could qualify for a business credit card. "But I don't have a business," you may be thinking. And you might not, in the traditional sense. However, if you're conducting business activities - even on a very small scale - you can likely be approved for a business card. And if so, it can make sense to sign up for and use a business credit card to keep your expenses separate and maximize your purchases.

Keep in mind that we're focusing on the rewards and perks that make these credit cards great options, not things like interest rates and late fees, which will far outweigh the value of any points or miles. It's important to practice financial discipline when using credit cards by paying your balances in full each month, making payments on time, and only spending what you can afford to pay back.

Do you qualify for a business credit card?

If you get a 1099 instead of a W-2 for work that you do, such as driving for Uber and Lyft or freelancing part-time, you are conducting business activities that would likely qualify you for a business card.

However, conducting business activities isn't limited to people who receive a 1099. Own a rental property? Sell stuff on eBay or Etsy? These activities generate taxable income and are also business activities, meaning there's a good reason to keep your finances separate with business banking services like a credit card.

Don't forget nonprofits

There are tons of small nonprofits that handle money, from youth softball teams to bowling leagues to flower clubs. A lot of these are run informally, but could use business banking services including a credit card. You don't even have to federally register your non-profit organization. A lot of states have low-cost, low-overhead ways to register a non-profit organization, and this is sufficient to establish a business banking identity.

Establishing a tax identity

The foundation of obtaining a business credit card is establishing a separate tax identity for your business activity. Fortunately, you don't have to do something complicated like setting up a Delaware C corporation in order to do this. Instead, all you need is a free tax ID number called an "EIN" from the IRS. You can sign up for an EIN for free on the IRS website.

The EIN is required for filing payroll taxes if you hire people, or if you issue 1099s to other people. You may never do that, but banks track and manage business accounts using this number along with your social security number.

You'll generally need an EIN in order to apply for a business credit card if you have a more formal business, but if you're a sole proprietor - meaning you have a side gig like selling items online - you can apply for a business card using just your Social Security.

Don't worry too much about income requirements

If you have a single rental property or a small side business like selling stuff on Etsy, it may not be generating a ton of income. That's fine - banks evaluate your credit risk based on the total picture of your income and assets, because you will be personally guaranteeing the business credit card (and on that point, consider carefully whether this is a good idea if anyone else is involved in the business activity).

I have a rental property that generates $6,000 per year in income, and that was sufficient to qualify for a business credit card because the bank evaluated its risk based on my personal income and guarantee.

Signing up for a business credit card vs. a consumer card

Business credit cards often have very sweet incentives to sign up, but they can also be harder to get than personal credit cards.

When you sign up for a business credit card, you're dealing with the commercial banking division of the bank. They operate differently, and the process with many banks tends to be more involved and take longer than getting approved for a personal credit card.

It's not uncommon for banks to ask for additional documentation, and an in-person branch visit may even be required. Banks do take a higher risk with commercial lending than with personal lending, so they'll want to get to know you and the business activity that you're conducting before approving you for an account.

Business cards aren't reported on your personal credit report

This may be a good or a bad thing, depending upon your perspective. Business credit cards don't impact your personal credit report. Instead, banks generally report to Dun and Bradstreet, which acts as a business credit bureau. That means that business credit card spending will not help you build personal credit (because these products aren't intended to be used for personal spending).

This also means that if your business gets behind on payments, it won't show up on your personal credit - unless the business defaults entirely and the account is sent to collections. At that point, the debt becomes "yours" because you personally guaranteed it.

Business cards are for business spending

Any spending you do on your business credit card should be related to the business - both for tax reasons and to stay in line with the bank's terms and conditions. That being said, a lot of spending you're doing personally today might more properly be categorized as business spending.

For example, if you drive for Uber, many automotive-related expenses such as gasoline, insurance, and repairs may be considered business expenses. Talk with your tax advisor to see where your business should be charging expenses.

Another thing to keep in mind is that when you take money out of the business, it doesn't have to be in the form of a check. The business could pay you in an equivalent cash value, such as gift cards purchased with the business' credit card.

Top business credit cards

So, you've read this article, and you're now convinced it's worth opening a business credit card to separate your expenses and maximize your rewards. If you think you're eligible for a business card and simply want to find the best option for you, here are a few top picks to consider. You can see more in our guide on the best small-business credit cards available now.

Capital One® Spark® Miles for Business - This card is one of the simplest business rewards cards out there. It offers 2x miles on every purchase (and 5x miles on hotels and rental cars booked through Capital One℠ Travel), and you can redeem miles toward travel purchases on your statement through the Purchase Erase feature, or transfer them to more than 10 airline partners. Plus, you can currently earn up to 200,000 miles as a newcardholder; earn 50,000 bonus miles when you spend $5,000 in the first three months, and earn 150,000 miles when you spend $50,000 in the first six months. The Spark Miles has a $95 annual fee that's waived the first year.
The Business Platinum® Card from American Express - This is a very premium business credit card, with a $595 annual fee, but if you can put its luxury travel perks to use, it could be well worth it. You get Centurion Lounge access along with access to several other airport lounges, and you get 35% of your Amex points back when you use Pay With Points to book airfare through Amex. The Business Platinum card's currently offering a welcome bonus of up to 100,000 points. You'll earn 50,000 points after spending $10,000 in the first three months, plus an extra 50,000 points after you spend an additional $15,000 in the first three months.
Ink Business Preferred Credit Card - This card stands out for a great sign-up bonus - 80,000 Chase points after you spend $5,000 in the first three months - and strong bonus categories. You'll earn 3x points on the first $150,000 you spend on travel and select business categories each account anniversary year (then 1x), and Chase Ultimate Rewards are some of the most valuable points in the game. There's a $95 annual fee.
Blue Business® Plus Credit Card from American Express - The Blue Business Plus is another great option if you want to keep things simple. It earns 2x points on the first $50,000 you spend each year, then 1x. There's no annual fee, so this is a great way to earn bonus rewards on your spending while keeping costs down if you don't need lots of extra frills.
Ink Business Unlimited Credit Card - Another no-annual-fee option, the Ink Business Unlimited offers 1.5% cash back on all your business' spending, with no cap on how much you can earn. If you have a Chase card that earns Ultimate Rewards points, such as the Ink Business Preferred Card, you can convert your cash-back rewards into Chase points that you can transfer to travel partners like Hyatt and United.

Business credit cards aren't an easy slam dunk, but they're more possible to get than you may think. Given that, why not double up on welcome bonuses? When you're flying up front in first class on an award flight booked with points from a card like the Business Platinum, the effort will have paid off.

Click here to learn more about the Capital One Spark Miles for Business.

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Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.