This is a subject I don’t know about much on this blog. That’s the notion of business credit. This blog is a personal one and I track the status of my dividend portfolio on a monthly basis. But, while dividend growth investing is one way to invest, it is not the only way. Indeed, this blog has delved into other areas, such as investing in real estate by purchasing a beach condo. The idea there is that I will use the income from real estate to supplement the contributions to my dividend portfolio. That being said, I am exploring the possibility of applying for business credit. Let’s dive in to discuss.
Why Get Business Credit?
Credit card debt, like money, is a tool. It can be used wisely or not. If not used wisely, it can get the holder of that debt into financial trouble – whether it be a person or a business. But, if used wisely, it can have a positive impact on the financial health of its holder.
One of the benefits to having the beach condo owned by the LLC is that the mortgage does not show up on my personal credit report. That will help me the next time I try to apply for credit – including business credit.
But, once I obtain business credit, that won’t show up on my personal credit report either – except for the hard inquiry that’s required to apply for the credit. Unfortunately, the business credit cards I’m interested in are ones that require a personal guarantee. That means that I will be personally on the hook if I default.
Business credit will help keep my business expenses separate, which I try to do anyway. Additionally, once I have enough credit available, I may use it to fund the down payment on another short term rental. Or, I may use it to fund some of the expenses associated with another real estate purchase – such as buying furniture or doing renovations, etc. Flexibility is the name of the game, and I’d rather have it and not need it, rather than need it and not have it. Regardless, I will be mindful to ensure that I use it wisely.
Which Business Credit Card Will I Get?
While there any many options to choose from, I narrowed it down to 2 credit cards: Ink Business Cash and Ink Business Unlimited.
Both cards have no annual fee, which was important to me. So, the difference comes down to their rewards. The Ink Business Cash offers 5% on the first $25000 spent in combined purchases at office supply stores and on internet, cable and phone services each account anniversary year.
Then it has a 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year.
Finally, it comes with a 1% unlimited cash back on all other purchases–with no limit to the amount you can earn.
The Ink Business Unlimited is a bit more straight forward. It offers the following:
- Unlimited 1.5% cash back on every purchase.
- Unlimited rewards with no limit to the amount you can earn.
Based on the above, I decided I am going to apply for the Ink Business Unlimited. The reasoning is simple. I don’t really spend money on office supplies, internet, capable and phone services using my credit card. Most of those are covered by the HOA fee (except office supplies). So, to make things simple, I will just get back 1.5% on all purchases spent using the Ink Business Unlimited.
When Will I Get The Ink Business Unlimited?
Not to toot my own horn, but I am fairly confident that I will be very competitive whenever I do apply for the Ink Business Unlimited. In fact, I would be shocked if I get denied. But we will see. The only thing I’m trying to decide is when I should apply for the card. Let me explain.
The card comes with a sign up bonus that says that if I spend minimum $7500 in the first 3 months, I will receive $750 in cash back. Not bad. The problem is, I don’t really see where I will need to spend $7500 in 3 months.
I do know that I want to get a new fridge, and replace the washer and dryer that I just bought (don’t ask). But, even if I did both, that’s probably about $4500 or so. There are some routine maintenance that I plan on doing on the condo, but I don’t know if those will add up to the minimum of $7500 spend. I also feel like I shouldn’t try to spend that money just to get the $750, but I figure, if was going to be spending that money anyway, then I might as well try to get 10% back.
Additionally, I am mindful that there’s a recession likely coming and sometimes banks try to tighten up their lending during tough economic times. So, there’s no guarantee the new card member offer will be around forever. Of course, there’s nothing wrong with just applying for the card, and not taking advantage of the signup bonus. But that’s a decision I have to contend with.
Conclusion
If I do apply for the Ink Business Unlimited, it would be my first business credit card. I may not be able to spend the minimum spend to get the sign on business, but I would be able to receive 1.5% cash back on all my purchases. Moreover, the card has a 0% interest rate for a year, with a 14.74% – 20.74% interest rate after that. The interest rate would only matter if I routinely carry a balance on my business credit card, and based on way I have been spending money, that is highly unlikely.
I am curious as to what you would you do in my situation? Would you apply for the card now, even though you would not be able to meet the minimum spend requirements for the sign on bonus? Or would you would wait until you’re able to take advantage of the minimum spend before applying?
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