One of my work colleagues asked me about opening a credit card to put around $8000 towards an unexpected AC unit replacement bill and I recommended opening a business card for the reasons described below. This post contains no referral/affiliate links and you can trust my advice.
U.S. consumers collectively owe a record $1.14 trillion in credit card debt, according to the Federal Reserve Bank of New York. More Americans are carrying debt for longer periods of time compared to the pre-pandemic era (see image below).
Carrying high balances on your personal credit cards
All major credit card issuers and lenders report your personal credit card balances to all three credit bureaus (e.g., Experian, TransUnion and Equifax). Your account balances can affect your credit utilization ratio, which is calculated as a percentage (see below):
- Credit utilization ratio is the percentage of available credit that is based on the balances that appear in your credit report.
- A lower credit utilization ratio is best to keep your overall credit score higher.
- Only your “revolving credit accounts” (credit cards, personal lines of credit and home equity lines of credit) are included in the calculations.
- Leaving a high monthly credit card balance (even if you are paying the minimum monthly payment) will negatively affect your credit rating.
Does leaving a high credit balance also affect authorized users?
Yes. For example, if you have added your children as authorized users of your credit card with a high balance, it will negatively affect their credit rating.
Will a closed account with an outstanding balance affect my credit rating?
Yes. Closed revolving credit accounts with outstanding balances will negatively affect your credit rating.
What Is a Good Credit Utilization Ratio?
While it is commonly suggested to keep your credit utilization at less than 30% to maintain good credit, I recommend keeping it below 10% to maintain an excellent credit score.
How do you calculate the credit utilization ratio across “all your credit cards”?
For example, if you have three credit cards, and each one has a $10,000 credit limit. Only one of them has a $8,000 balance and the other two cards have a $0 balance. Since your total available credit is $30,000 and your total balance is $8,000, your overall utilization ratio is 37.5%.
How do you calculate the credit utilization ratio for a “single credit card”?
It is important to know that the individual utilization ratio of a single credit card can also affect your credit scores. For example, if your credit report shows that a single credit card has a $5,000 balance and a $10,000 credit limit, your utilization ratio is 50%.
Do business credit cards report your balances to personal credit bureaus?
No. Most business credit cards do not report your balances to the personal credit bureaus (unless you default), with the exception of most Capital One cards. For the two business cards (Spark Cash Plus and the Venture X Business), Capital One is no longer reporting to the personal credit bureaus.
Do not max out all your personal credit cards before applying for the business cards
It is important to NOT max out all your personal credit cards if you are planning to get a nice big credit line on your first business credit card. Business credit cards will still run your personal credit before approving you and they tend to decline your application if they notice large balances on your personal credit cards.
Best 0% APR transferable point earning business credit cards
0% APR Business Cards
| Business Credit Card | 0% APR Length | Typical Credit Limit on approval | Notes |
| Ink Business Unlimited® Credit Card | 12 months | 3-6K for Sole-proprietors; higher (20-40K) for other high grossing businesses. | 0% APR offer is always available. |
| Ink Business Cash® Credit Card | 12 months | 3-6K for Sole-proprietors; higher (20-40K) for other high grossing businesses. | 0% APR offer is always available. |
| The Blue Business® Plus Credit Card from American Express | 12 months | 5-10K for Sole-proprietors; higher for other businesses. | 0% APR offer is always available. |
| American Express® Business Gold Card | 6 months | Charge card, but the final limit is based on your credit worthiness. | |
| Capital One Spark Miles Select for Business | 9-12 months | 5-10K for Sole-proprietors; higher for other businesses. | Look for periodic 0% APR offers. |
| The American Express Blue Business Cash™ Card (NO POINTS) | 12 months | 5-10K for Sole-proprietors; higher for other businesses. | 0% APR offer is always available. |
| U.S. Bank Business Platinum Card (NO POINTS) | 18 months | 20-40k based on your business income. | Look for periodic 0% APR offers; only business card with 0% APR for Balance Transfers; |
Do I Qualify for a Sole Proprietor Small Business Credit Card?
Most consumers (age 18 and above) qualify for sole proprietorship business credit cards by doing any of the following things that can qualify as a small business:
- Selling used items on Craig’s list, eBay or Amazon.
- Teaching, coaching or tutoring.
- Food delivery services like Uber Eats and Grubhub.
- Driving for Uber or Lyft.
- Homemade goods or arts and crafts.
- Homemade wood furniture.
- Building computers as a hobby and selling them on eBay (my hobby).
- Selling goods at bake sales, street fairs and farmer’s markets.
- Renting a room, apartment or house on Airbnb.
Sample Amex Business card application
| Legal Name of Business | Use your own name as the business name (no need to come up a business name). |
| Business Name on Card | Use your own name. |
| Business Mailing Address | Use your home address. |
| Type of business | Sole Proprietor |
| Tax Identification Number | Use your SSN |
| Business category/type/subtype | Pick whichever categories are closest to your business hobby (manufacturing/electronics/computers, used clothing, arts & crafts etc.,). Some applications may ask for subcategories. |
| Number of Employees | 1-2 (including you) |
| Annual Business Revenue | Try 20-30k per year. Your credit line depends on this amount. |
| Years in Business | Put 5-10 years or longer depending on how old you were when you first got the business idea and made a sale (e.g., eBay sales at age 17). |
| Authorizing Officer | Owner |
| Personal Information | This section is self-explanatory. |
| Gross annual income | Include all your household income, not just the business income. |
Sample Chase Business Card Application
Recommended Order of Business Card Applications
If this is your first business card, Amex is very easy to get, so I recommend starting with the Amex Business Gold card. Look for an offer (Google Incognito) with a 100-150K SUB with 0% APR for 6 months.
Try to apply for an Amex Blue Business Plus card 1-2 weeks after getting the Business Gold card. If you get an Amex pop-up saying “you are not eligible for the SUB,” move on to the Chase cards.
Conclusion
If you have some unexpected (unavoidable) expenses and are looking to open a new credit card with a 0% APR, I recommend opening a business credit card since your credit score is not adversely affected from leaving balances for 12 months. I would recommend trying the Amex over the Chase to get a higher credit limit approval. If you have other business cards from the same bank, the available credit can be easily transferred between them (review).