When considering a business credit card as a freelancer, look for higher credit limits, easy expense tracking, useful rewards and competitive rates.
If you’re a freelancer, you might think you should avoid credit cards at all costs. After all, freelancing leads to some unique financial situations and inconsistent income. But if you’re intentional about your credit cards, you can use them to your advantage.
Card issuers actively promote the benefits of business credit cards. They can look glamorous and essential for any small business. but they’re not always the best choice for every freelancer.
If you’re on your own, with limited expenses, you may not need a business card. You can use your personal credit card for occasional expenses and track them separately when reporting for taxes.
On the other hand, if you need credit to maintain or grow your business, a business credit card can be very helpful – and a good starting point. With responsible use and regular on-time payments, a business credit card can help you qualify for loans and lines of credit down the line.
Business credit cards have the same basic requirements as personal credit cards. You’ll need to make regular on-time payments to avoid late fees and dings on your credit score. Any balance you carry will incur interest charges too.
Fees, interest charges and other terms always vary, so read the fine print closely. Be aware of the effort required for keeping a business card up to date and healthy.
1. Do you have a lot of work-related expenses?
If your work as a freelancer doesn’t require you to spend a lot, then a business card might not be right for you. However, if you’re paying for resources, including anything from entertaining clients to buying supplies you use in your work, a business card may be worth considering.
2. Can you keep your expenses separate?
When tax time comes round, a clear accounting of expenses related specifically to your work is essential. If you don’t spend a lot to support your freelance work, you may not need a separate card to track them. But if you make regular purchases that can be counted as expenses, a business card can help.
Some states recommend a separate business checking account to validate your business operation. Often a business credit card is often offered as part of their small business banking service.
3. Are the rewards and perks useful?
Almost every credit card offers some form of a rewards system. Whether you receive cashback, travel miles or other incentives, it’s important to know how to get rewards and perks you’ll actually use.
Some credit cards offer bonus points for specific purchase types or on certain dates. Try to plan some expenses, like office supplies or travel purchases, during a period when your card offers extra rewards.
Shop for a card that offers rewards that support your business. if you don’t travel, you might skip a card offering bonus airline miles and opt for discounts where you spend for your business. If you’re not sure, cashback rewards can be a safe bet.
4. Are the interest rate and fees competitive?
While it’s best to pay off your full balance every month, freelancers can face big swings in income. Keeping a zero balance on credit cards isn’t always feasible, and low interest rates and fees can make all the difference.
Most business cards charge annual fees, but most are tax deductible. Just double-check your tax status and make sure you can afford the fee regardless. They can be a few hundred dollars, with penalties for late payments.
5. Is the account easy for you?
Some cards and their accounts are easier to manage than others. Some offer bonus apps, like accounting software or expense tracking. But do you need any of that? Or are those bells and whistles you’ll never use but end up paying for with higher fees and rates?
Valerie Johnston has been a professional writer for over 16 years covering a vast number of subject matter with an emphasis on personal finance