Funding side hustles with a credit card
Quick insights
- Credit cards may offer a way to cover startup costs for side hustles like freelancing, reselling or gig work.
- Rewards credit cards could help you earn cash back or points on everyday business expenses.
- Tracking spending and creating a repayment plan could support long-term financial goals.
Starting a side hustle can be an exciting way to explore a passion, generate additional income or work toward long-term financial goals. A side hustle is a small, informal venture you run alongside your main job, which is different from a registered business. This distinction matters when you are considering options like business loans or business credit cards. Like many ventures, it may require some upfront spending—whether for equipment, services or marketing. If personal savings aren’t an option, a credit card could be a flexible way to access funds. In this article, we will cover how you may be able to use a credit card to support your side hustle in a way that aligns with your goals and budget.
Getting started with credit card funding
Using a credit card to fund your side hustle means leveraging personal credit to start or grow a part-time income stream, such as freelancing, e-commerce or gig work. Credit cards can provide accessible funding, especially if your side hustle isn’t formally registered and you don’t qualify for business loans or business credit cards.
In these cases, personal credit cards can help cover startup or ongoing costs, but they won’t build your business credit score. Here’s why credit cards are a popular option for side hustle funding:
- Some cards offer rewards or cash back on business-related expenses.
- Certain credit cards may include low interest promotional periods, which can help reduce initial borrowing costs.
- Credit cards may offer convenience and flexibility for covering smaller-scale startup costs.
You might consider using a credit card to fund your side hustle if you need to invest in tools, services or inventory that could generate income. If you’re testing an idea, credit cards may offer a flexible way to get started.
Using a credit card to fund your side hustle
Credit cards may offer flexibility when used with intention and a plan. Here are a few tips that may help guide your spending:
- Consider applying for a card specific to your needs: Keeping your side hustle expenses separate from personal spending could make it easier to track costs and organize your finances.
- Explore low or promotional interest rate offers: Some credit cards may offer reduced interest rates for a limited time, which could help manage costs when starting out.
- Set a spending cap: Consider how much you can afford to repay each month and avoid spending beyond that amount. It's also a good idea to keep your credit utilization in mind when making purchases on your credit card. Try to stay at or below 30% of your credit limit because this may help maintain a healthy credit score while giving you flexibility to manage your expenses.
- Track purchases carefully: Monitoring your side hustle expenses closely may help you stay on budget and plan for repayment.
Side hustle ideas you can fund with a credit card
Not all side hustles require significant investment. Here are a few ideas that could be manageable with a credit card:
- Freelance work: Services like writing, design or virtual assistance may only require a few tools like a laptop and software.
- Online reselling: You could purchase clearance or wholesale items and resell them on various platforms.
- Content creation: Starting a podcast or blog may involve initial expenses for equipment or hosting.
- Gig economy jobs: Ride-sharing apps may require some upfront costs for vehicle maintenance, supplies or insurance.
Credit card tips for side hustles
Using a credit card to support your side hustle can be a flexible option, but it’s important to manage it responsibly. Avoid carrying high credit card balances because interest charges can add up quickly. It's a good idea to try to keep your credit utilization ratio at or below 30% of your limit. This helps protect your credit score while giving you more wiggle room to cover side hustle expenses.
Creating a repayment plan could help you stay on track and reduce financial stress. Be aware of your card’s interest rate, especially if any promotional period ends.
Choosing the right credit card to fund your side hustle
Finding the right credit card can make it easier to manage your side hustle expenses. You may want to:
- Compare cards with cash back or rewards: Rewards credit cards may offer benefits like cash back or points on common business purchases, which could help you earn value on money you’re already planning to spend.
- Check the credit limit: Make sure the limit aligns with your expected spending, so you don’t risk overextending. A higher limit can also help keep your credit utilization ratio lower, which can benefit your credit score.
- Understand the terms and fees: Take time to review the interest rates, annual fees and any penalties to avoid surprises later.
In summary
Whether you’re getting started or growing an existing side hustle, credit cards can be a useful option. By planning ahead, understanding your card’s terms and staying on top of spending, you may be able to make the most of your financing while staying in control of your finances.
