When it’s time to get a business credit card for your side hustle

Side hustles have become increasingly common in the lives of everyday people. For many, they consider these gigs important to their overall financial well-being. Nearly 2 in 5 (39 percent) U.S. adults say they do something to earn extra income on the side (i.e., a side hustle), and 33 percent of those with a side job need the income for regular living expenses, according to Bankrate’s 2023 Side Hustle Survey.

Even if you already work a second job, you may feel the need to increase that income to keep up with the rising cost of living. If you’re trying to grow your side gig, you might consider getting a credit card for your business. Here’s how to know if it’s time:

You have substantial startup costs

Depending on the type of side gig you start, you may need to invest some money to get it going. For example, if you want to rent out a room with a company like Airbnb, you may need to spruce it up first. New bedding, furniture and a fresh coat of paint can set you back thousands. Or maybe you want to make and sell jewelry, clothes, crafts, baked goods or other products on an e-commerce site. If so, you may have to purchase products and set up a website.

Instead of playing small and delaying growth until you raise cash to start, consider applying for a top small business credit card. While you may not have enough funds at the ready, a bank certainly does.

Once you know how much you need to  get your business off the ground, you can pursue the right business credit card to purchase those items as long as you’re able to afford the monthly payments. If you have large initial costs, for example, you might consider the Capital on Tap Business Credit Card, which offers a chance at a credit limit as high as $50,000.

While we consider it among the best business credit cards with no annual fee, the variable APR can be much higher than the average credit card interest rate. For that reason, this card only makes sense as a financing option for those who qualify for an ultra-low APR thanks to their superb credit. If that’s you, you can also look forward to covering some of those upfront costs with the $200 bonus you’ll receive after charging $15,000 in the first three months of opening the account.

Your operating costs are growing

As your business grows, so too may your operating costs. For example, if you started a side hustle watching your neighbor’s dog every week for $100 and it’s going well, why stop with one dog? By adding regular clients you could earn more. But that comes with the added cost of pet-sitting insurance, supplies, gas to pick up other pets and even advertisements for your services.

When asking yourself, “Do I need a business credit card for my side hustle?” the answer is yes when you want to scale up and need financing to handle your side hustle’s expanding needs. When your operating costs are growing alongside your side gig, consider a business credit card that offers substantial rewards as you spend on the things involved in your business.

For instance, the Ink Business Cash® Credit Card offers 5 percent cash back on the first $25,000 combined spending on:

• Office supply stores
• Internet services
• Cable services
• Phone services

If you’ve been shouldering your business’s initial startup costs with your personal cards, getting a business credit card for those increasing operating costs can be an excellent idea. Not only can you earn rewards, but you’ll also build business credit and be able to keep your business and personal finances separate.

Or, maybe you got a bare-bones credit card to start your business, but now that you’re generating more income, you want a higher-end credit card with better perks and rewards. As a business owner, it’s good to periodically assess your financial tools to make sure they’re still the best option for you.

You’re traveling more

Maybe your side hustle is photographing weddings and special events, and your clients span the country. Or you are turning your passion for adventure into writing about far-flung destinations for media outlets or your blog. A top business credit card with travel rewards could be an important addition to your wallet.

Analyze your travel needs and get the business card that will help you keep costs to a minimum while making your journeys more comfortable. Some are ideal for airfare, others for lodging or for car rentals and gas.

There are plenty of cards to choose from — for example, if you are dedicated to a specific airline, consider credit cards that have partnerships with them, such as Delta SkyMiles® Gold Business American Express Card, which awards 55,000 bonus miles after you spend $4,000 in purchases within your first six months of account opening and features a free first checked bag and priority boarding.

Loyal to the Marriott brand? Check out the Marriott Bonvoy Business® American Express® Card, which offers one free night’s stay every year after your card renewal month, complimentary Gold Elite status and a high rewards rate in several business-centric categories. 

You need short-term financing

The last thing you want to do is fork over money for interest charges while trying to earn extra money to make your life easier. So you may want to pursue a business credit card that offers a 0 percent introductory APR.

With such a card, you can carry over a balance for a set number of months and not have to worry about interest adding to the amount you owe. As long as you pay off the entire debt before the regular rate goes into effect, you will not be charged any financing fees.

This feature can save you a tremendous amount of money. Some of these intro offers are for longer periods, such as the U.S. Bank Business Platinum Card*, which offers a 0 percent intro APR on purchases and balance transfers for 18 billing cycles (with a 17.24 percent to 26.24 percent variable APR thereafter). It has no annual fee, too.

There are also times when you may prefer to borrow a fixed amount of money and then pay in even monthly installments. If so, a loan through the Small Business Association (SBA) may be a smarter choice. With the SBA’s 7(a) Small Loan program, you can borrow up to $5 million, an amount that far exceeds the line on most business credit cards, and pay it off over several years.

What you need to get a business credit card

Applying for a business card is easier than you might think. The one major barrier to entry is that you will almost always need good credit, which is generally a credit score of at least 670.

For most small business credit cards, you don’t need a registered LLC or corporation to apply. Instead of a business tax identification number, you may list yourself as the sole proprietor and use your Social Security Number rather than a tax ID number. You may have to list the type of business you have and the date you started.

As with all credit cards, you will also list your income and basic expenses. Chances are your side hustle earnings qualify, as issuers consider a large variety of income-producing ventures. What is important is that you have enough money coming in to handle your expenses and the payments associated with the account.

Business card or personal card?

Getting a business credit card isn’t always the best choice for a side hustle. That’s why some gig workers still depend on some of the best personal credit cards for purchases. So when you’re deciding between a business card or personal card, it’s best to assess the state of your business and its spending.

If your side gig is still starting out or you don’t do a hefty amount of business spending, a personal credit card might be the way to go until business picks up. When should you apply for a business credit card? Usually, if you need a larger credit limit, have substantial business costs, or need to keep your business and personal spending separate, then you might want to consider a business credit card.

After getting the right business card, use it well

Once you have the right small business credit card, be sure to use it advantageously. Your activity will likely appear on your consumer credit reports, as well as your business’s. Yes, that means late payments and other negative activity with your business credit card can hurt your personal credit score.

Thankfully, the process for building business credit is pretty simple. Most importantly, make all of your payments on time and don’t come close to maxing out your credit lines. You’ll want to make the most of your business credit card’s rewards, too. The more you charge, the more you’ll earn, but you’ll also have to pay off your balance each month as often as possible to come out ahead. If you want to reinvest your credit card earnings into your side hustle, you can — but you may also want to use them to alleviate the financial pressures that inspired you to start the business in the first place.

The bottom line

A business credit card can be a valuable tool for those looking to grow their side hustle. By choosing the right credit card for your business, you can cover operating costs, earn rewards and take your side gig to the next level. For the best business credit card options, you’ll need to make sure your credit is in the good to excellent range. Assess your spending, determine how much you need and compare rewards to find a business credit card that can help you push your side hustle to new heights.

*Information about the U.S. Bank Business Platinum Card has been collected independently by Bankrate. Card details have not been reviewed or approved by the issuer.