Don’t be scared of business credit cards

Nothing confuses people more than applying for business credit cards. Some people flat out refuse to do it. I think the hardest issue for people to grasp is the definition of business. The average person thinks of a business with a name whether it be Coca Cola or Jim’s Lawn Service. Big or small, they seem to think that it requires some type of formal paperwork from the government. Thankfully, that is generally not the case at all.

The term business is very loosely defined. If you’ve ever watched Shark Tank you’ve probably seen people go on there with a business that was little more than an idea. You may have heard the term “pre-revenue” which is a fancy way of saying they haven’t sold anything yet. While it’s hard to sustain a business if you haven’t actually sold anything yet, it does happen. In fact, the IRS will allow you to claim business expenses for at least some time while you get your business off the ground. However, there reaches a point where they declare this “business” more of a hobby and will prevent you from deducting those expenses. So as you can see, not every business needs to have a big record of sales or any sales.

Speaking of the IRS, they don’t care about your business credit cards. This is another big fear of people and this is another one that I don’t understand. I’m not here to give you tax advice or legal advice so if you have further questions, feel free to speak with the appropriate professional. However, if you really think about it, you’ll realize that the IRS cares about your tax return and not what you spend your money on. They focus on you paying the appropriate amount of tax so as long as your income is done the right way, I fail to see how they are going to care about what credit cards you are using. There are countless travel hackers using these cards and there isn’t one reported issue about the IRS giving anyone a problem.

Putting all of that aside, some people think that you can only use a business card for business expenses. At least for this issue, there is at least a little substance to it. Credit card companies like Chase state that these business cards are for business expenses but the consensus in the travel hacking community is that this is just something that they have to say. Once again this is where we have to leverage the power of the internet. Thousands of travel hackers have been using business cards for years without issue. Credit card companies aren’t stupid. They can see what people are doing with these credit cards and if it was a problem, they wouldn’t be permitting them.

So to recap, you don’t need an actual business, you are not going to violate any laws and you are not going to get in trouble with the IRS just because you applied for and use a business credit card. Credit card companies are not going to care about whether you use your credit card on personal or business expenses. Plenty of people use these credit cards all the time without issue. If you still have reservations you can speak to a lawyer or an accountant but you just have to accept that this is a thing that is permitted.

So how can you apply for a card if you don’t have a formal business? Well just like you would with any other credit card. The only difference is when they ask for your business name, you have to just put your legal name. That’s it! For the vast majority of credit cards, you won’t have an issue at all. You may run into a card or two here or there that will give you a problem. Despite owning a good size business with 16 employees, I could not get a United Airlines Business Card. They just didn’t like that I put everything on my Schedule C. Word is that this might no longer be the case as this was years ago. But with the cards that really matter, the Chase Inks, you should not have a problem at all.

In the end, you have to determine what you are comfortable with and what you’re not, but I hope you can understand that the common fears that people have are completely unfounded.