TPG reader credit card question: Do cards opened under my LLC's name count against my 5/24 status?
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While Chase's 5/24 rule — automatically rejecting applications of customers who've opened five or more credit cards in the last 24 months — is incredibly frustrating to award travelers, it's had the unintended benefit (for Chase at least) of making Sapphire and Ink credit cards the first on many people's wish list. TPG reader April wants to know if business cards opened under her LLC's name will count against her 5/24 status with Chase ...
[pullquote source="TPG READER APRIL"]Will cards opened for my LLC count against my personal 5/24 status if the cards are opened in my LLC's name?[/pullquote]
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Good question April. People spend so much time trying to carefully calculate their 5/24 status so they don't waste an application and risk rejection. It's important to keep in mind that there's a difference between the cards that are restricted by the 5/24 rule (only Chase cards) and the cards that count against your 5/24 status (all personal cards and some business cards).
In terms of April's question, it doesn't matter whether you're talking about a card for a sole proprietorship that uses your name as the business name or a card for your LLC that uses a business name. All small business card applications are approved using your personal social security number and credit report, meaning the application process works the same way whether you're applying for a card for an established LLC or a small and informal sole proprietorship.
We'll talk about the exceptions to this rule in a moment, but the same reason most business cards don't count towards one of your 5/24 slots is the same reason they're great for businesses with high expenses. Simply put, most business credit cards don't show up on your personal credit report. When you open the account a credit inquiry will show up on your report, but the account itself (and importantly, the utilization ratio) does not. This means that your business can spend tens or even hundreds of thousands of dollars a month without it affecting your personal credit.
Because most business credit cards don't appear on your personal credit report, they don't show up as a new account in Chase's system and they don't count against your 5/24 status. Interestingly enough, even Chase's own business cards like the Ink Business Preferred Credit Card don't add to your 5/24 score.
However, if you open a business credit card issued by Capital One, Discover or TD Bank, these do report to your personal credit report and count as one of your 5/24 slots. This is true whether you open it as a sole proprietorship with the business name matching your name, or as an LLC with a different business name.
While April is right to be cautious about calculating her 5/24 standing with Chase, it doesn't matter if she opens business cards under her LLC name or as a sole proprietor using her name for the business name. All that matters is whether she's applying for a business card from one of the issuers (Capital One, Discover or TD Bank) who are known to report business cards to your personal credit report. If so, the card will take up one of her 5/24 slots but if it's from any other issuer she'll be fine.