A lot of people don’t know this, but anyone can apply for a business credit card, even if they don’t own a “business.” All you have to do is use select “sole proprietor” as your business type, use your name as the business name, and use your Social Security Number as the tax ID number.
Who can be a sole proprietor? Anyone can claim to be a sole proprietor, which is the most basic type of business recognized by the IRS. According to the IRS, “A sole proprietor is someone who owns an unincorporated business by himself or herself.” This means that anything you do can be considered a business. This can include selling things on Ebay, holding garage sales, babysitting, freelance work, consulting, coaching, or anything else.
Even though a sole proprietorship is a legal business, there are no formal requirements such as paperwork or registration fees for starting a sole proprietorship. The only qualification to be a sole proprietor is to claim you are a sole proprietor. It’s as easy as that.
Note: It’s important to understand that with a sole proprietorship, there is no legal separation between you and your business. Your business and personal debts are considered the same.
Why business cards can be good for individuals
If you apply for a business credit card as a sole proprietor, you can use it for personal use as well. Some business credit cards are actually better than a card offered by the same company and branded with the same name.
Here are some of the reasons business credit cards can be good for individuals:
Better rewards and bonuses. Credit card companies know that most businesses charge more every month than individual customers and are often more profitable. This means the competition is fierce and credit card companies will do what it takes to recruit new customers. This works in your favor as they often have better cash back and rewards programs, and sign up bonuses to attract new customers.
Higher credit limits. Many business credit cards offer higher credit limits compared cards issued to individuals, because businesses often take in and spend more money than individuals. Why is a higher credit limit good for an individual? Because your credit score is determined using a formula that includes credit utilization (how much of your available credit you use). A higher credit limit can raise your credit score.
Balance transfers and 0% introductory offers. A lot of people use balance transfer offers to take advantage of credit card arbitrage (paying 0% interest on money borrowed from credit card companies). This can be a profitable enterprise. Others like to take advantage of 0% introductory offers so they can go out and charge some startup costs and pay them off over time without paying interest. When used correctly, these actions can either make or save you a lot of money.
Anyone can sign up for a business credit card
I applied for my first business credit card as a sole proprietorship, soon after starting this site. I later formed an LLC to make it easier to separate my expenses and I later signed up for another business credit card under my LLC. I currently use the The AmEx Gold Card and a Discover Business Card.
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Very true; I have a business credit card and it was not at all difficult to get. You basically just have to plug in a company name.
However it would be smart to actually “own” that company name which would be known as a “DBA” or “doing business as” name before you go around using it.
You can go down to the courthouse and pay $15 (in TX at least) and reserve any available business name as yours for a period of 10 years or so. Then with the piece of paper they give you you can also open business checking accounts and do anything else any business can do.
On a related note: I started getting offers in the mail for business letterhead, business cards, even shirts and other merchendise to put my business name/logo on after I got my business credit card. Any person can order and receive that stuff too! Realizing that made me realize I need to be more wary of every “business” despite their professional uniforms/cards/letterhead.
I really wish I had done this to start with. Ive over the years built up about 40k worth of points on my visa and its basically worth nothing. Their rewards are awful.
LOL. I got the mail offers for letterhead, pens and other paraphernalia as well. One company went so far as to send me a sample pen with the name of my LLC on it and a package to order more of them. The pen is nice, but I don’t really advertise my company. I only formed it to separate my business expenses for this and other sites. Good idea for them though!
Tough break, Jesse! I always go for the cash back!
Cash Back is king. I am wondering however if there’s any credit cards that give good points ( more than 1 point for every dollar spent) that could convert into real cash ( a check sent to my door in my name).
I use Chase Rewards and they apply the rewards directly to my balance. Which is nice, although I want to simply get cash for whatever reasons..
There are some cards that you can convert points to cash, but the conversions are always different depending on the card company. That’s one reason I prefer cash; I always know the conversion rate.
There are some rewards cards that do pay cash and don’t apply your rewards to your balance.
Hello! Sorry to be a stickler, but the IRS doesn’t allow “anything” to be a business.
It’s really important that it is NOT a hobby and you are engaged in the transactions for the purpose of profit and a form of self-support (not just extra cash on the side) by incurring consistent time and expense into marketing and organizing the business.
Haha, what a downer, right?
thanks for pointing this out, I did not know this. But yeah, I would definitely want to know more about the different types of businesses before doing this personally, just for my own sake. Especially with taxes. If you’re a sole proprietor, do you do two sets of taxes, etc.
MoneyEnergy,
Sole proprietors only do one set of taxes. As a sole proprietor, there is no distinction between the money earned in your business and your regular income. This is not always the case for other business types.
I remember vaguely from my tax class that in order to be considered as a business for IRS purposes, you have to earn a profit for at least two out of the past five years. The thing is that if you are losing money on this “business” IRS could contest that this is actually a hobby and you lose a preferential tax treatment.
That’s true if you are taxing your income as a business, but my understanding of a sole proprietorship is that there is no separation of business and personal income. But I’m not a tax pro, so be sure to talk to one before filing taxes.
Next Millionaire,
Some business cards have annual fees, so that is something you want to look out for. That is actually why I signed up for the Discover Business Card. It has a great cash back program, gave me a $100 sign up bonus, and doesn’t have any annual fees. It’s a very good business card.
what credit cards can i apply for using business credit only?
Hello Livia,
To answer your question, the two business credit cards I linked to in the article are great cards to choose from. The Discover Business Card offers a $100 cash back bonus if you spend $1000 within the first 3 months, and the The The AmEx Business Gold Card offers a $50 cash bonus after your first purchase.
The Discover Business Card does not have any associate fees, while the AmEx Gold Card has a $125 fee (waived for the first year). I currently have both cards and they are both quality cards for a business.
Other good business credit cards can be found in this article – Best Gas Rewards Cards. The business cards I recommend are The Blue Cash for Business Credit Card, the TrueEarnings Business Card from Costco and American Express, or the SimplyCash Business Card from American Express. None of these three cards have annual fees.
All of the cards in this e-mail come with cash or point rewards systems which will earn you additional cash back on items like gas, office supplies, cell phone service, restaurants, and more.
I’m a bit skeptical. With most crdit cards, they will show instnat approval, however with the business one, they said they would send me a decision via mail in 14 days. Maybe they’re more selective now than when this blog was written?
TJ, yes, the business credit card market and the credit card market in general have changed in the last year and a half since this was written. Credit was much easier to receive a couple years ago. However, don’t let that discourage you. There are many good options to choose from. Check out this article: Best Credit Cards: Cash Back and Rewards Points.
Wish I knew that before I applied! Hope if it gets declined it doesn’t negatively affect my credit score.
TJ, it shouldn’t affect your score much if you aren’t approved. It’s usually a couple points at most, and the effect goes away as time passes. I wouldn’t be concerned.