Why You Should Think About Applying for Small Business Credit Cards

Small business credit cards can be a true asset when trying to accumulate miles and points. How so? They offer you an opportunity to earn additional miles and points while often will not impacting your credit score as much as personal cards do. Here are some things to know about getting business credit cards and how they can be such a great benefit to someone trying to earn more miles and points.  

Have a business 

The truth is that some people will open small business credit cards when they don’t actually have a business at all. They’ll even fabricate the purpose and income of their nonexistent business on their applications. I never recommend lying or making misrepresentations to banks, so I suggest for you not to do this. Plus, if you got hit with a financial review and they wanted you to provide some verification documents about your business, what would you do? 

Starting a business 

The good news is that it isn’t difficult to start a “business.” Even if you start re-selling items on eBay, Amazon, or Craig’s List that could be a business. Or maybe you have an expertise so you could do some type of consulting or tutoring on the side. Even something like offering editing/proofreading services on Craig’s List could be a legitimate business service offered. 

Sometimes you can sign up for a business credit card for a business that hasn’t actually came into existence and is “0 days old.” In that case when you fill out your app you’ll have to state things like $0 revenue, 0 years of history, etc., and I feel like that will make it harder to get approved for certain cards. That’s just my hunch, though, and some people have gotten approved for business credit cards with no history, so it’s possible to do. 

EIN

You don’t have to have an EIN (also known as a Federal Tax Identification Number) for most business credit cards (you can often just use your social instead). However, setting up an EIN is free and takes like two minutes, so I suggest for people to look into doing that if they can. If you don’t, you should be fine just to use your social security number.

Personally liable 

Even if you apply with an EIN you’ll still have to input your social security number because this will account will ultimately be tied to you and approval will be based on your credit report. 

Spend requirements 

Most business credit cards have higher spend requirements. It’s not uncommon for them to be $5,000 as opposed to $3,000 and sometimes they can climb to over $10,000. Thus, when looking at business credit cards, it’s important to always pay extra attention to what the minimum spend requirement is, especially for Amex business cards which tend to fluctuate often. 

Won’t lower your average age of accounts 

Many business credit cards do not report to your personal credit report. This means that you can get approved for one of these cards and not lower your average age of accounts by having a new account show up on your credit report. And for purposes of some application rules, that means that these business cards may not show up and exclude you from being eligible to apply for them. 

However, you will still have a hard pull show up on your report. For some banks, these hard pulls for business credit cards cannot be combined with hard pulls from personal cards, so that’s something to keep in mind, too. 

Utilization won’t matter

While I always advise to never treat a rewards credit card with a high APR like a loan, if something did happen where you had to put a big purchase on a card, your utilization on your personal credit report would not be affected. So maybe you plan on paying something off in a few months. Well, although you’d be hit with interest payments, if you used a business credit card you could at least keep your utilization low during that period.

If you’re running a business with very high expenses this really helps, especially if you have an Amex charge card and are putting substantial spend on the card each month. 

No pressure to close

A great thing about these business credit cards is that there’s no pressure to keep them open because you’re not going to be affecting your average age of accounts. So if you want to cancel the business card before an annual fee hits and you can’t get a retention offer, there won’t be much of an impact on your credit score since your utilization will go unaffected as will your average age of accounts. (Assuming the card didn’t report to your personal credit report, of course.)

Getting approved 

Getting approved for certain business cards like the Chase Ink can be a little tricky because there are so many conflicting data points. It’s really hard to tell why some are approved and others are rejected. In my experience, getting approved for business cards from American Express, Citi, and Bank of America have been easier but as always, YMMV.  

Recon calls 

There’s always the chance that you’ll have to go to a recon call with a business app. If that’s the case, it’s really important to have the details down regarding your business. You should know your details by memory or have a cheat sheet with the age of your business, profit, revenue, expenses, and of course, know how to describe what your business does, number of employees, etc. 

The threat of being interrogated in a recon call is why some people don’t apply for business credit cards at all, but if you actually have a business and know your details you shouldn’t have to worry about anything. 

Final word 

Overall, business credit cards are a tremendous way to earn more miles and points while also helping to give your credit report a rest from the damage that new accounts can cause. And once they’re open you can always feel less pressure to keep them open since cancelling the card won’t usually have the same effect that canceling a personal card would. While some of these cards can be a little tricky to get, it’s usually not very difficult to get approved for many of them and can definitely be worth it in the end since it can help mitigate damage done to your credit report.