Business credit cards offer convenience as well as unique perks and rewards, and they help keep business expenses separate from personal ones. To carry a business credit card, you may not need to be the owner of a formal business — everything from freelancing to house-sitting can help you qualify. Here’s what you need to know about opening a business credit card.
Can You Get a Business Credit Card Without a Business?
In general, you can apply for one of the best business credit cards even if you don’t own a business. Freelancers, gig workers and anyone else who earns money independently can be considered business owners, and are therefore eligible to open a business credit card.
You don’t even need to have earned money yet to be considered for a business credit card. However, you might need to have good credit and income in your personal life.
[Read: Business Credit Cards.]
Business Credit Card Requirements
To begin with, you don’t need to have registered your business to get a business credit card. You will need to provide some personal information and information about your business, though.
If you’re the only owner and employee, you’re a sole proprietor, and may be able to apply using your Social Security number instead of a government-issued employer identification number, or EIN. The card issuer may conduct a hard pull on your personal credit report to approve you, so be truthful on your application.
Some of the information you can expect the card issuer to ask may include:
— Your name.
— Business name.
— Business address.
— Business email.
— Business phone number.
— Type of business.
— Years in business.
— Number of employees.
— Business income.
What Type of Work Qualifies for a Business Credit Card?
If you bring in money on your own and not as an employee of a company, you’re a business owner. Side hustles count, too. If you create and sell items, buy and sell items, sell your services or knowledge (including through an app), or have clients, you can be considered a business owner.
While you may think that owning a business requires a formal designation such as a limited liability company, or LLC, it’s not required if you’re a sole proprietor.
Some examples of work that could qualify you for a business credit card include:
— Freelancing.
— Reselling.
— Selling art and handmade goods.
— Tutoring.
— Dog walking.
— House-sitting.
— Delivery driving.
— Ride-hailing driving.
— Nannying.
— Consulting.
— Renting out a room or home.
[Read: Best Cash Back Credit Cards.]
Can an Individual Apply for a Business Credit Card?
Yes, you can apply for a business credit card as an individual. When the card application asks for “business name,” you can use your name instead.
Plenty of freelancers and other business owners operate under their own name and open a business credit card in their own name as well. Doing so helps you keep your business and personal life separate.
“Anyone starting a business or working independently knows how crucial it is to keep track of their finances,” says Rod Griffin, senior director of public education and advocacy for Experian.
“As a gig worker or freelancer, establishing a business entity and having credit issued to the business, rather than the individual, can be a wise financial move,” he says. Plus, keeping your business debts separate may help your personal credit from being affected if your business struggles.
Personal Credit Card vs. Business Credit Card
Personal credit cards and business credit cards serve different purposes and report to different credit bureaus. Personal cards are good for paying for everyday living expenses such as gas, groceries, shopping and dining, while business credit cards are designed for business spending.
Business credit cards are more likely to offer rewards and perks tailored to business use, such as cash back on office supplies or statement credits for business software, and may offer larger credit lines than personal cards.
Remember, you’re still personally responsible for the spending on your business credit card, no matter what kind of purchases you make or what business structure you use. And while your personal credit score is private, your business credit score, which is built from your business credit history, is public.
How to Apply for a Business Credit Card Without a Business
When you apply for a business credit card without a registered business, you’ll likely apply as a sole proprietor. You’ll need to have your personal information on hand as well as your business information.
Don’t worry if you don’t have business income yet; card issuers will check your personal credit report when approving you for a card, so you may be approved if your personal income is sufficient — even if your business income so far is zero.
The following steps will help you get started:
1. Since the card issuer will run a hard pull on your personal credit, you may want to check your credit report beforehand to make sure there are no errors. And if you’ve placed a freeze on your credit file with the three major credit bureaus, you’ll need to lift it so the card issuer can access your file.
2. Choose the business credit card that best meets your needs. That may mean it has a low annual fee, great credit card perks or cash back rewards in your preferred categories, or it could be a card with a low APR or business perks.
3. Fill out the application, providing all of the requested information and details about your business, including EIN or Social Security number, annual revenue and income, and expected monthly expenses.
4. Wait for approval, which could take anywhere from a few seconds to a few weeks.
[Read: Best Credit Cards with High Credit Limits.]
Possible Uses of a Business Card for Personal Expenses
Some people may want a business credit card to earn rewards or expand their credit limit. They might even think it will help their credit score. Using a business credit card will build your business credit history, not your personal credit history. While no one will stop you from using a business credit card to pay for personal expenses — which is perfectly legal — you may risk more than you gain.
Chad Cummings, an attorney and certified public accountant who advises small business clients, says you should avoid commingling personal and business expenses on a business card.
“The short-term convenience of using a business credit card or line of credit for a personal expense is far outweighed by the risk,” he says. You could lose liability protection in a future lawsuit, for example, plus you’ll have the headache of segregating business and personal expenses at tax time (including the heightened risk of audit by the IRS). You could even lose credibility as your business grows.
“Investors will be much less likely to invest in a company where the owners or managers use the company (and the company credit cards) as a personal piggy bank,” he says.
Using your business credit card for personal expenses is also likely a violation of your cardholder agreement. Some credit card agreements explicitly state that by applying for the card, you agree that the account will only be used for business or commercial purposes.
Breaking that agreement could mean the card issuer can close your card, and you may lose any perks, rewards or cash back. It’s better not to mix business and personal, even with your credit cards.
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Can I Get a Business Credit Card Without a Business? originally appeared on usnews.com
Update 01/19/24: This story was previously published at an earlier date and has been updated with new information.
