Credit card tips for the self-employed


Whether you’re a full-time freelancer or a part-timer looking to earn some extra money in the gig economy, a credit card that’s used strategically can help improve your bottom line and financial management strategy.

From helping you manoeuvre through periods of uneven cashflow and keeping financial records in order, to offering rewards and easy access to capital–we explore some facts and benefits about using a dedicated business credit card that the self-employed should know about.

What freelancers should know about credit cards

1. Avoid using the same credit card for business and pleasure

By using a separate credit card just for your freelance business, you’ll simplify your bookkeeping and avoid wasting time (or extra money on accountant fees) come tax season. Plus, by having a dedicated card for your business, you can more accurately monitor work-oriented cashflow without having to worry about your personal spending skewing the numbers.

Note: Don’t forget that even with a dedicated business card, you still need to save the receipt for anything tax deductible in case you get audited.

2. Compare cards and look for the right rewards

Every card is different, and to find the best credit card in Canada for your freelance business’ priorities, you should compare rewards and cards across banks. For example, if driving between clients’ offices is a routine part of your work, you’ll want to compare options and find a card that offers the most rewards on gas. If flying often is on your agenda, then a travel credit card can offer points to help save on airfare. Meanwhile, a cash back card can help you accrue money that can be invested back into your business.

3. Understand there can be credit card fees

Credit cards offer freelancers an easy way to access credit, earn rewards, and cope through periods of uneven revenue. However, it’s critical to understand there can be fees associated with using a card—from annual fees to interest in cases when a balance isn’t paid off within the 21-day grace period.

4. Credit scores

In most cases, applying for and using a credit card for your freelance business can impact your personal credit score, and you may need to assume some personal liability. So, while a business credit card that’s used responsibly can improve your score, the opposite may be true if late or missed payments become routine.

Business vs personal credit cards

Personal credit cards are accessible to everyone and used by people to pay for their everyday purchases while business credit cards are only available to registered businesses. While both fundamentally operate the same way, there are some minor differences between the two. Business credit cards, for example, tend to offer rewards tailored to business owners, higher credit limits, and can sometimes include access to comprehensive reporting tools or dedicated financial advisors.

Using a personal credit card instead of a business credit card may be the right move for many self-employed professionals. For one, the application and approval process for personal credit cards is far more straightforward (i.e. you won’t have to provide supporting business documentation, such as an article of incorporation, as is often the case with business card applications). Second, if your business overheads are low or you’re a sole proprietor, you may not need to leverage the benefits offered by business credit cards, and therefore, a personal card can suffice for your day-to-day operations.

Now with that being said, if you’re using a personal card for your freelance business, it’s critical that you still treat it like a business card and not use it pay for your personal spending. The moment you start juggling business and personal expenses on a single credit card, it becomes infinitely harder to manage your financial records.

Getting the most out of your business credit card

The expression “every dollar counts” rings particularly true for self-employed freelancers. With no guaranteed salary, finding opportunities to save on expenses and maximize savings are critical. A credit card that offers rewards and perks can help.

By using one of the best cash back credit cards to cover business costs for example, freelancers can get upwards of 4% cash back on groceries intended for the office fridge to 2% on office supplies. Picking a card that offers the highest rewards on your most frequent business expenses can maximize your savings.

Rewards aside, several cards also provide ancillary perks that freelancers should tap into. Some card benefits worth highlighting include discounts on car rentals that can come in handy during business trips, or free extended warranties, which can prove useful when buying expensive office supplies. For freelancers who regularly deal with vendors in the US, a no foreign transaction fee credit card could prove useful by waiving additional fees for purchases made in a non-Canadian currency.

Ratehub is a website that compares mortgage rates, credit cards, high-interest savings accounts, chequing accounts and insurance with the goal to empower Canadians to search smarter and save money.

Header image created using Creative Common assets from Pablo Stanley.