Differences Between Business Credit Card and Personal Credit Card
What’s surprising to most people is that there’s actually not that much difference between a business credit card and a personal credit card. The main difference is that business cards do not show up on your personal credit report. Other than the initial hard pull from the application briefly lowering your credit score a few points, what you do with the business card will not affect your credit score. Any missed payments or high utilization that would normally negatively affect your credit score are not applicable when you have a business card.
However, this does not excuse you from not following general credit card advice and good practices. You should always be paying your balance in full and on time so that you can stay in the good graces of the issuing bank. Be sure to also familiarize yourself with the credit card rules for each bank before applying!
Benefits Of Business Credit Cards
As mentioned earlier, one of the big benefits of business cards is that they don’t show up on your credit report. This also means that they’re excluded from counting against Chase’s 5/24 rule. This is huge because you can now continuing getting approved for new cards in between your Chase card approvals while still remaining under 5/24. By applying for business cards you give yourself lots of flexibility to do things like preserve some 5/24 spots for future Chase cards or continue to churn more Chase Ink business cards.
For example, if I just got approved for the Chase Southwest Rapid Rewards Performance Business card, I have a 3 month recommended cool down period from Chase before I can get another Chase card. Instead of waiting the full 3 months with no SUB I’m working towards, I can get something like the Amex business platinum to tide me until my next Chase card. The great thing is that I can do this without sacrificing a Chase 5/24 slot!
Another nice thing about applying for a business card as a sole proprietor is that there are also (usually) no additional tax implications. If you’re just spending normally on the card, you don’t have to do any special reporting or calculations when tax season comes around. The only thing to be wary of is referral bonuses which are taxed as income. So if you hold a business card with the ability to refer people and your referral bonuses amount to $600 or greater in a calendar year, you will receive a 1099-int and have to report that when filing taxes.
Business credit cards also offer unique multiplier categories that personal credit cards typically don’t have. A good example of this is the Amex business gold, which offers 4x on categories like shipping purchases and advertising purchases that are not found on personal credit cards. While most of these categories are geared towards businesses, there are still some categories that can also be extremely profitable for every day users.
For example the Chase Ink Cash is a popular choice because it gets 5x on internet and 5x on office supply stores. Almost everyone has some kind of internet bill to pay so this is an easy way to get 5x on those purchases. Office supply stores like Staples and Office Depot are so great because they sell 3rd party gift cards like Uber, Doordash, Airbnb etc. This is beneficial because instead of paying for those services directly with a card like the CSR and only getting 3x, you can now buy their gift cards at an office supply store and get 5x! In addition to this, these stores often run fee free promotions or discounts on their Visa or Mastercard gift cards, so not only will you get 5x on a card you can use anywhere but you will even save some cash depending on the promo!
Who Can Get a Business Credit Card
Many people are scared off by business cards because they assume that you need a full fledged business in order to get one of these cards. However that is not the case! One of the easiest ways to get a business card is to apply as a sole proprietor. This basically states that you are the exclusive owner of your business and are not officially registered as a LLC or corporation. What constitutes a sole prop “business” is very subjective and is not really enforced.
For example, if you tutor on the side, resell clothes/electronics, or do freelance work, that is considered a business and you’re eligible to open a business card as a sole prop. Even if you have not officially started your business yet and are thinking of starting one, you can still apply for a business card! Of course if you do own your own LLC or corporation, you’re definitely eligible to apply for a business card.
How To Apply For Business Credit Cards
Now that we’ve gone through the specifics of business cards, let’s actually walk through how to apply for a new business card as a sole proprietor. In this example, I’ll be doing a dummy application for a Chase business card.
Entering Personal Info
The first step is to enter your personal info like name, address, SSN, etc. After that you have to fill out your business title.
For business title you should just put owner, CEO, or something similar. In this case, “owner” is fine.
Entering Business Info
Now comes the part that many people are unsure how to fill out but it’s actually very easy. The first step is to choose Sole proprietorship as your legal business structure.
Next for your legal business name, just simply put your <first name> <last name> like “John Doe”. For your desired business name on card you can put anything but I usually just put my name again.
For the tax ID type, choose Social Security Number if that’s an option but if that’s not available, you would still enter your SSN.
Continuing on, for the business address, select “Yes” for “business address is the same as personal address”. If this button is not available and you have to enter an address, just re-enter your personal address.
For number of employees, just enter 1 and for business number use your mobile phone number.
Now you need to fill out the date your business was set up and also provide the annual business revenue. Sometimes banks will ask “number of years in business” instead of an actual date like Chase does above so be wary of that. Annual business revenue is just the gross total amount made in a year before subtracting costs. This is NOT the same as profit so make sure you’re putting the correct number down.
Note that if you’re just starting out your business or planning of starting one, you can put 0 for number of years in business or the current date depending on what the form is asking for. For the annual business revenue you can put how much you anticipate your business will generate.
Lastly we get to the business category which just asks you to indicate what kind of business you run.
What goes in this section will be different for everyone but for me, I usually pick something like what is shown above and haven’t had any issues. Each bank will have slightly different categories and wordings but for the most part they are all pretty similar.
After filling all this out, you should be good to go! Just double check that all your info is correct and hit submit! If you do own your own LLC, that’s more straightforward for you as you would just enter your EIN where it’s asked instead of SSN.
What Are The Best Business Credit Cards
There are a lot of different business cards out there and I give a more in depth description of each one in our best credit cards page so I’ll just do a quick list of good business cards and their major pros here.
- Chase Ink Unlimited
- High SUB, can get 1 every 3 months
- 1.5x UR on all purchases
- Chase Ink Cash
- High SUB, can get 1 every 3 months
- 5x UR on internet and office supply stores
- Chase Ink Preferred
- High SUB, can get 1 every 3 months
- Can transfer UR to travel partners
- Amex Business Platinum
- High SUB
- Lounge access
- Annual credits to offset AF
- Bank of America Alaska Airlines Business
- Companion fare
- Can get multiple in a year
- Good SUB for Alaska miles
- Barclays AAviator Business
- Good SUB for American miles
- Amex Blue Business Plus
- 2x MR on all purchases
Conclusion
Business credit cards provide awesome benefits and are an essential part of a churner’s credit card strategy. They really aren’t that different from personal credit cards and just because there is a slightly higher barrier to entry shouldn’t deter you from applying for them. Consider grabbing some great business cards next time you’re looking for a new credit card!
