Your side business could unlock an unknown financial benefit

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We take side hustle for many reasons. At best, it’s because we’ve turned a passion into a source of profit. At the other end is out of necessity due to bills or, more recently, inflation.

Whatever the reason, a good hustle can have many benefits. Some of them are obvious – like, you know, extra money. Some of them are less obvious.

For example, there’s a big benefit to running your own hustle that a lot of people overlook: small business credit cards. And taking advantage of this perk can unlock a whole world of rewards and bonuses that would otherwise be out of reach.

Your secondary activity is a business

No matter how big your side business is, it’s always a Company. Selling second-hand finds on eBay? It’s a company. Teach neighborhood children basket weaving? Also a business. Driving for Uber on the weekend? You are an entrepreneur with, yes, a business.

For a typical side hustle, you’re a sole proprietor. This means that you include your business income in your personal income. However, in the eyes of credit card issuers (and the IRS), you still own a business. And it allows you to apply for a business credit card.

Separate finances are happy finances

There are several reasons why you might want to get a business credit card for your side business. The first – and arguably the most important – is that it helps you with your accounting.

Even as a sole proprietor, you need to keep track of your business expenses. And it helps a lot if you separate them from your personal expenses (especially at tax time). Using a business credit card for your business expenses makes it much easier to track and identify purchases made for your business versus those made for yourself.

Cash back and points and miles, oh my

As important as it is, however, easier bookkeeping isn’t the only reason to ask for a business card. There are also rewards.

Business credit cards work like personal cards in many ways, including the ability to earn rewards on your purchases. You can find cash back business cards. You can get business cards that earn points. You can even get some pretty awesome business cards with travel rewards.

Additionally, business credit cards tend to have bonus rewards categories that personal cards do not cover. If you drop a pretty penny on your advertising purchases each quarter, the right business card can help you maximize those rewards.

And let’s not overlook the bonuses. If you’re someone who likes to collect sign-up bonuses, you could easily run out of personal cards to collect after a year or two. Access to business card bonuses can mean twice the options for earning big prizes in cash back, points and miles.

Keep an eye on the fine print

Although business cards work almost exactly like personal cards – you make purchases and pay your card bills just like you would with any other card – there are a few minor differences.

On the one hand, business credit cards are not automatically covered by the same legal protections as personal cards. Take fraud protection, for example. By law, your liability for fraudulent card purchases is limited to $50 on personal cards. Business cards are not covered by the same law.

That being said, issuers extend most, if not all, personal card protections to their business card offerings, even though they are not legally required to do so. Just in case, however, be sure to read the terms and conditions carefully.

Another thing to keep in mind is that business credit cards require a personal guarantee. This means you’ll need to agree to take personal responsibility for the card – and its balance – when you apply. If something happens to your stampede, you will still be responsible for any debt on your business credit card.

If you decide to get a business credit card for your side business, it’s important to treat it the same way you would treat a personal card. Pay your bill on time each month, keep your balances low and spend responsibly. As long as you follow the rules of proper credit card use, you can turn this side benefit into a big plus.

Check out The Ascent’s best credit cards for 2022

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