You could be considered a sole proprietor if you make money from a hobby or as an independent contractor and are a member of the 204 billion-dollar gig economy. A sole proprietorship is a kind of unincorporated business held by a single person. You may be able to include this extra revenue as business income, and if you do, you'll be eligible to apply for a business credit card as a single owner.
If You Don't Have a Business, You Can Still Apply for a Business Credit Card
If you have a side gig or full-time job that requires you to spend money on things like supplies or transportation, using a credit card for your business can help you keep track of your business spending separately from your spending, and it may even allow you to earn rewards on that spending.
It is crucial that you completely grasp the expectations of the credit card issuer and the obligations imposed on you since corporate credit card terms and conditions may vary somewhat from those of personal credit cards. For example, please apply for a business credit card and agree to use it only for business expenses. You will be responsible for paying off the balance even if your firm ceases to operate.
While it's possible that your company won't be treated as a separate entity, you should nonetheless be ready to answer questions about it in your application. If your firm qualifies as a sole proprietorship, you may file taxes using your Social Security number instead of a separate business tax ID. We may require further information from you, such as your business's annual revenue or sales, to complete our review of your application.
Certain credit card issuers cap the number of incentives you may accumulate within a predetermined amount of time, such as two years. The same credit limit restrictions may apply to any business credit cards you apply for with the same credit card provider. It is possible that you will not be eligible for the new card member bonus that comes with a business credit card if you have already reached the maximum number of incentives for which you may qualify.
You will be required to supply your personal information and business information, just as you would be required to do with any other credit card application. Your account information will likely be recorded on your credit report if you do not have a separate business organization. This may negatively impact your credit score and your ability to get accepted for more credit cards and loans. You run the risk of being held personally responsible for any charges made using the card, which would be the case even if your business were a distinct organization.
On your application for a credit card, you should be completely honest and avoid the urge to exaggerate any of the figures to increase your chances of being accepted. Suppose the credit card issuer seeks more paperwork and finds that it does not match the information you gave on your application. In that case, you may be subject to criminal prosecution for perpetrating fraud.
Your application may be denied if the card issuer determines that your personal credit history does not exceed their qualifying requirements. Your business revenue may not be sufficient to sustain the card's credit limit, which is another reason your application may be denied. Your chances of being authorized for a credit card may be improved if you already have a working connection with a financial institution since this provides the credit card issuer with a method to check your assets and evaluate your capacity to make payments.
Use of a Business Credit Card Comes With Certain Risks
Compared to consumer credit cards, safeguards afforded to business credit cards are sometimes more limited. For instance, before increasing the variable interest rates on consumer credit cards, credit card issuers must provide advanced notice to cardholders and information on how to opt-out.
Because the same regulation does not apply to business credit cards, this might result in an unexpected rise in the interest rate applied to your debt. In addition, if your business's credit card contains balances with varying interest rates, the card issuer is not compelled to apply payments that are more than the minimum amount to the debt with the highest interest rate. This might result in more costly finance charges.
