As a sole proprietor, you often have unique needs for a business credit card. Choosing the right card starts with looking at your credit, business needs and spending habits. Here are some factors to consider when choosing a business credit card as a sole proprietor.
- Credit score. Like personal credit cards, business cards have credit requirements you’ll need to meet to qualify for most cards. Issuers use personal credit history to determine creditworthiness for business cards. Review your credit score and report, and look for cards aligning cards with good approval odds for your credit profile.
- Business expenses. Determine where your business spends most, and then maximize rewards earning by targeting cards that earn bonus rewards in those categories.
- Features. Protect yourself and your business by looking for cards with consumer and travel protections (specifically, protections you are likely to make use of). Features like 0% APR offers are helpful if you want to finance purchases or transfer over card balances. If you fly regularly, a card with lounge access may be worth splurging on. Your needs are unique to your business, so evaluate your situation to determine how to get the most out of a business credit card.
- Business tools. Many business cards come with added tools and features to help manage business finances. Benefits like free employee cards may not be useful if you run your business solo, but compatibility with your bookkeeping software could make life much easier.
Benefits of Credit Cards for Sole Proprietors
Having a solid business credit card allows you to separate your business and personal expenses. While there’s no legal separation between you and your business, you can separate your expenses using your business credit card, making accounting and taxes much easier.
Having a business card also helps free up cash. Depending on your expenses and how quickly you receive or collect payment from customers or clients, the ability to finance expenses becomes invaluable.
When you apply for a business credit card, issuers look at your personal credit. If you have a registered business, having a business credit card can help you build up your business credit. The process to register your business varies depending on where you live. You’ll also want to obtain a Data Universal Numbering System (DUNS) number from business credit bureau Dun & Bradstreet (D&B).
Does Sole Proprietorship Affect Your Credit Score?
As a sole proprietor, your business isn’t a separate entity. When you apply for a credit card, card companies look at your personal credit history and finances to determine eligibility. The application process involves a hard credit inquiry, which can temporarily affect your credit score.
When you use a personal credit card for business expenses, you make a personal guarantee to repay those charges. Missing a payment can negatively impact your personal credit. If you end up carrying a balance, your debt-to-income ratio increases, which can also affect your credit score.
Credit card companies generally only report business card activity to business credit bureaus. Some issuers will report negative business card account activity, like late or missed payments, to consumer credit bureaus. The best way to protect your personal credit and build your business credit is to use your business credit card responsibly and make on-time payments each month.
Find the Best Business Credit Cards of 2024
To view rates and fees for The Blue Business® Plus Credit Card from American Express please visit this page.
