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. About 40 percent of U.S. consumers have a side hustle, and 33 percent of those with a side job rely on that income to cover basic living expenses, according to a Bankrate 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 delaying your side hustle until you can scrape up the 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.

You don’t want to overspend and get into debt, though, so it’s a good idea to consult with a professional in your field. The nonprofit SCORE is a great option for those who want to connect with a retired executive who can help them develop a business plan at no charge. A mentor from SCORE can help you figure out the amount you need to begin your side hustle.

Once you know how much is required to get your business off the ground, you can pursue the right business credit card to purchase those items while also being 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 it’s 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 with superb credit that qualifies them for an ultra-low APR. If that’s you, you can also look forward to covering some of those upfront costs with the $200 bonus that 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, perhaps you began your side hustle taking care of your neighbor’s dog. On a weekly basis that casual activity generated $100. But why stop with one dog? With a few regular clients, you can really multiply that figure. When you do, though, you may need to get pet-sitting insurance, buy a lot of supplies, spend more on gas to pick up other pets and advertise your services.

When you want to scale up, consider a business credit card that can handle your side hustle’s expanding needs. It should offer substantial rewards as you spend on the things involved in your business, so look for one that offers a high-value rewards rate on those upcoming expenses. The Ink Business Cash® Credit Card, for instance, gives 5 percent cash back on the first $25,000 you charge on total purchases within its bonus categories: office supply stores, internet, cable and phone services.

If you’ve been shouldering your business’ initial startup costs with your personal cards, getting a business credit card for those increasing operating costs can be an excellent idea. Not only will 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 from which to choose. 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 80,000 bonus miles after you spend $6,000 in purchases within your first six months of account opening (Offer Ends 3/27/24), 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 many categories. 

You need short-term financing

The last thing you want to do is lose money on financing while you are trying to earn extra money to make your life easier. Therefore, 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 long periods, such as the U.S. Bank Business Platinum Card*, which comes with a 0 percent intro APR offer for 18 billing cycles. 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 to be 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.

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.

*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.