Credit cards for self-employed people

Compare credit card offers for self-employed business owners. Use a card to earn rewards and improve your cash flow.

By   |   Verified by Yvonne Taylor   |   Updated 22nd October 2020

Comparing Credit cards for self-employed people

Marriott Bonvoy Business American Express Card

Marriott Bonvoy Business American Express Card

Highlights

  • Earn 3 points for every $1 in Card purchases on eligible gas, dining and travel, 5 points for every $1 in Card purchases at participating Marriott Bonvoy properties, and 2 points for every $1 on all other purchases charged to the Card.
  • Enjoy an automatic upgrade to Marriott Bonvoy Gold Elite status when you reach $30,000 in purchases on your Card each year including business and travel insurance benefits and services .
  • The $150 annual fee may be tax deductible while getting the flexibility to pay balances in full or over time.

Bank promo

  • Earn a Welcome Bonus of 50,000 Marriott Bonvoy points, enough for 3 free nights at a Category 2 hotel . Offer subject to change at any time.
American Express Business Edge Card

American Express Business Edge Card

Highlights

  • Earn 3 times the points for Card purchases on eligible business essentials including Eats & Drinks, Rides & Gas, and Office Supplies & Electronics, up to a maximum of 75,000 points, and then earn 1X the points on other purchases.
  • Business and expense management tools and resources including business and car rental insurance benefits and services.
  • The $99 annual fee may be tax deductible while getting the flexibility to pay balances in full or over time.

Bank promo

  • Earn 30,000 Welcome Bonus points when you charge $5,000 in purchases to your Card in your first three months of Cardmembership.
  • Up to 12,000 Bonus points Annually: You can earn 1,000 Membership Rewards points for each monthly billing period in which you spend $3,000 in purchases on your Card. This could add up to 12,000 points in a year.
American Express AIR MILES Gold Business Card

American Express AIR MILES Gold Business Card

Highlights

  • Earn 1 Reward Mile for every $15 in Card purchases at AIR MILES Sponsors and 1 Reward Mile for every $20 in Card purchases everywhere else.
  • Business and expense management tools and resources including business and car rental insurance benefits and services.
  • Pay no annual fee. Plus, enjoy the flexibility to pay balances in full or over time.

Bank promo

  • Get 150 bonus AIR MILES Reward Miles when you spend $1,000 in the first 3 months of Cardmembership.

Overview

Running your own business can be a rewarding experience, and many self-employed professionals have turned to using credit cards to maximize their benefit from business purchases. Credit cards for self-employed people have many benefits, such as earning bonus points on your most common business expenses, which makes it quicker to redeem points for travel or cashback rewards. In this article, we’ll explore everything you need to know about getting a credit card when you're self-employed, including who they’re for, who can apply, what you need to apply, and more.

Who can apply? 

While there are many credit cards suitable for self-employed people, there are none specifically designed for the self-employed, so the same eligibility criteria applying to most credit cards also apply here. You need to have reached the age of majority in your province or territory, meet any requirements regarding citizenship or residency, and be able to prove your income from self-employment.

If you're running your business as a company and paying yourself a wage, you can supply pay stubs as proof of income, just like anyone else. But it's less straightforward if you are the sole proprietor of an unincorporated business. You may have to provide two years' worth of tax returns or assessments, or a proof of income statement from the CRA, accompanied by the latest financial statements for the business.

What will I need to apply?

You will need:

  • Proof of identity (e.g. driver's licence or passport)
  • Citizenship status (via birth or citizenship certificate) or residency entitlement (via a visa)
  • Residential address, and other contact details
  • Proof of income. As a self-employed individual, you will need to show documents that verify that you have had an income from this source for at least two years. These can be pay stubs (if you run your business as a company and pay yourself a wage), tax returns, tax assessments, CRA proof of income statement, or the financial statements (Profit and Loss statements) of your business.
  • Savings. Showing lenders that you have the ability to save money lets them know that you won’t be a high risk for missing payments. But having savings is not essential.
  • Reasonable credit score. This is what lenders evaluate when deciding whether or not you’ll be approved for a credit card. So the better your credit history, the higher your chances will be of getting approved.

Credit card alternatives

If you don't want to use a credit card, or are finding it difficult to get approved because you've only just begun self-employment, you do have other options:

  • Debit card. Debit cards are the most popular alternatives to use, as they only let you spend what you have. These are linked directly to your bank account, so you never have to worry about being in debt. Conversely, you are limited to the capital in your account.
  • Prepaid card. This works in a similar way to a debit card, but you pre-load it with cash instead of linking it to your bank account. They can be used in the same way to buy goods and services both online and in-store.
  • Personal loan or business loan. Taking out a loan could be cheaper, especially if you can get a good interest rate. However, you need to be sure that you can afford repayments, as well as be aware of late fees and possible early loan discharge fees.
  • Buy Now Pay Later services. Many companies offer Buy Now Pay Later plans for various purchases such as appliances, furniture, electronics, fashion and services. With this type of plan, you can purchase something you need and then spread the repayment over several interest-free installments. Late payment fees or interest charges may apply if you miss the payment due dates.

Learn about credit cards for self-employed

What are credit cards for self-employed and how do they work? Find out below.

  • Pros & cons

  • Tips

  • FAQs

Applying for too many cards can damage your credit

There are many factors that can affect your credit score, including your current amount owed, credit history, new credit, and types of credit used. Each time you apply for a new account, lenders will check your creditworthiness. Not only can too many card applications negatively impact your score, but lenders may also get suspicious if you get access to a lot of cards and may reject your application, which in turn causes further damage. Work out how much credit you need, and try to stick to using only one credit card for business if possible.

Earn rewards points on business expenses

Many credit card companies offer rewards points or cash back when you make purchases. If you use your card for business purchases, these rewards can add up quickly. You could use the points or cash back to reduce your business expenses.

Free benefits can help your business

Many credit cards come with complimentary benefits that are very useful for business travelers. A card that offers airline miles, airport lounge access and travel insurance can reduce your business costs significantly.

Having a credit card is a good way to build your credit score

In order to fund your business you're going to need a good credit score, and if you're a sole proprietor the credit score in question is your personal score. Your credit history is a record of all the money you borrowed, including whether you paid it back or not. Every time you open a new account, the lender reports this activity, and any late payments or defaults, to a credit reporting agency. Your credit history determines your credit score, which lets lenders know if you’re creditworthy. Once you get a credit card and use it responsibly, you will improve your score for future credit applications, such as a home loan.

It’s easy to dig yourself into a hole

It can be difficult to navigate cash flow when you're self-employed and your income is irregular. Depending on your credit limit, a new card may suddenly give you access to more funds, making it easy to overspend if you’re not disciplined. To avoid this potential pitfall, it’s important to spend only what you can pay back each month. If you don’t already keep track of your budget, it’s best to start doing so to help you stay in control.

The cost of borrowing can be high

As a self-employed individual, if you don’t pay your balance off on time every month, additional fees and interest charges can quickly add to your existing debt. By all means make use of the interest-free days on purchases, but it's not a good idea to use a credit card as a long-term finance option for your business.

In addition, many cards come with an annual fee and also provide access to cash advances, but the interest rate charged on these is often even higher than the one for purchases.

Be prepared to prove your creditworthiness

To get approved, you may need to show proof that you can afford repayments, so your income plays a critical role. Card providers need reassurance that you will be able to meet monthly repayments, especially if you want to be given a workable credit limit rather than one which is too restrictive. They may also review your current obligations such as rent or mortgage payments, so make sure these details are ready before applying.

If you've taken the leap into 100% self-employment you're going to need substantial proof of a reliable income from this source. You're not going to be able to rely on your previous employment income, which you no longer receive. This means that if you can't yet demonstrate two years of reasonable self-employment income you may need to postpone your application until you can, or apply for a secured credit card.

Don't ditch your old card

A personal credit card account that you've been using for a long time with a good payment record will have a positive impact on your credit score, but if you close the account all that good credit history will be lost and removed from your score. So, when you apply for a new credit card to help you run your self-employed business, hang on to that old card. You may need it if your application is rejected, or your new credit limit is too low.

Get your credit score before applying

Knowing the essentials about your credit scores and report before applying for credit is a great way to get ahead. Your score is calculated based on multiple factors including: 

  • Payment history
  • Credit utilization
  • Length of credit history
  • Total number of accounts and mix of credit types
  • Number of credit inquiries by potential lenders

Keep in mind that you’re entitled to one free credit report per year from the Canadian credit reporting agencies, Equifax and TransUnion. Review your report to make sure there aren’t any mistakes. Incorrect entries can have an impact on your score, so it’s best to take care of any errors before applying.

How to extract maximum benefit from your credit card

If you can afford to spend the time required to separate business and personal expenses, you can maximize your rewards by using one card for all your purchases – business and private. Using a single card will make it easier for you to meet any targets for sign-up bonuses or higher cashback tiers. But if you're going to use your card for your self-employment expenses only, try to use it at every possible opportunity, to earn more rewards and boost the cash flow benefit. You can even pay your suppliers by credit card if they are willing, thus extending the payment terms.

How to manage your credit card used for business

Once you've been approved for a new credit card, decide whether you're going to use it as a personal card only, a business card only, or as a mix of the two. Mixing personal and business purchases on a single card is not a good idea unless you're prepared to spend a lot of time separating the two kinds of expenses at month end or at tax time. Many credit cards aimed at business users have special tools for reporting expenses by category, or for transferring entries directly into your bookkeeping system.

Limit the number of applications within a short period of time

Be careful of applying for too many cards at once. If several credit providers inquire about your history in a short period of time, your score may be affected negatively. Avoid multiple inquiries by applying for the card you’re most likely to qualify for based on your current score and self-employment income.

Can I apply if I've been self-employed for a short time?

Yes, you can apply even if you’ve been self-employed for only a short time, but you're going to find it difficult to prove a sustained self-employment income. If your self-employment is a side gig and you're still employed elsewhere, you should be okay. Otherwise, you may want to consider an alternative payment or financing option – debit cards, prepaid cards, bank loans and BNPL – until you can prove at least two years of self-employment income.

Can I use a personal credit card for business expenses?

Yes, it is possible to use it for business transactions. In fact, using your personal card more often for any kind of expense (such as office supplies) will unlock more rewards points and benefits if you have a rewards card. But it's best to take some sensible precautions. Business expenses can run at a higher level than personal ones, and maxing out your personal credit card could see incurring high-interest debt and also lowering your personal credit score because you've increased your credit utilization ratio. You'll also struggle at tax time when it comes to distinguishing between business and personal expenses.

You might want to consider using a business credit card instead, to keep your business expenses separate, and possibly take advantage of higher credit limits often available to business users.

Can you get a credit card if you have no income?

If you don’t have enough self-employment income to qualify for a credit card on your own, there are other options:

  • Get a co-signer. Ask a family member or friend with a good income and reasonable credit score to co-sign your application. They will be accepting legal responsibility for making the payments on your account if you fail to do so.
  • Become an authorized user. You may be able to become an authorized user on someone else's credit card account. You'll get a card with your name on it, but the account owner is responsible for paying the account balance, including any purchases you make yourself. It means that you'll need to work out an arrangement for repaying the account owner.
  • Put down a deposit for a secured credit card.Secured credit cards need an upfront cash deposit as security, usually equal to the credit limit you are looking for. The deposit protects the issuer because they could access it if you fail to make your payments. The deposit is refundable if you close your account or upgrade to a normal, unsecured card after demonstrating your ability to make repayments for a reasonable length of time.

How do I apply for a self-employed credit card?

Applications for credit cards for the self-employed are much the same as applications for any other kind of credit card. To apply, make sure you have the following to hand:

  • Proof of identity, age, citizenship or residency
  • Proof of income
  • Details of savings, if any

You can then fill out an application online, as this is the fastest way to get a response. You can also apply by phone or mail, but these options will take longer compared to doing it online.  

What income do I need for a credit card?

When you apply for a credit card, your income is an important eligibility requirement that the provider will use to assess your ability to repay your monthly balance. The minimum income requirement generally starts at $12,000 a year (before tax), which means there are low income credit card options out there.

What proof of income will I need to provide?

You will need to show one or more of the following, usually going back two years:

  • Pay stubs
  • Tax returns
  • Tax assessments
  • CRA proof of income statement
  • Profit and Loss statements for your business, preferably verified by your accountant

Will the bank need to contact my accountant?

Not unless you supply your accountant's contact details and give them permission, but if you have an accountant who can verify your income, you’ll have a much easier time when applying for a card.