Ask Finder: Should I get a personal or business credit card as a sole trader?
Your options depend on how your business is set up and what you'll use the card for.
I'm getting ready to turn my side-hustle into a full-time business and I want a credit card to keep my work spending separate and help with cash flow. I currently run my business as a sole trader and don't make enough money to register for GST. Should I get a personal credit card or a dedicated business card? What are the differences between them?
This is a really great question to ask as a sole trader because you can technically apply for either a personal or a business credit card. With that in mind, let's start with the basic differences between these types of credit cards.
Personal credit cards are a popular option for small businesses in Australia and can be used to pay for many common business expenses, such as office supplies and equipment, travel costs and direct debit payments for bills.
In comparison, business credit cards are specialised accounts and usually offer more features to help you keep track of expenses. For example, many business credit cards let you directly export transaction data to accounting software programs such as MYOB, Xero and BAS. This can simplify your tax reporting and save you (or your accountant) time on manually importing bank statements into your chosen software.
Most business credit cards also offer customisable statements and a wider range of download formats, including CSV and Excel. In comparison, personal credit cards typically provide PDF statements that you need to manually convert to any other format.
Some business credit cards also give you access to useful Internet banking tools that help you with budget tracking, spending analysis and forecasting.
If you're planning to set up premises or hire employees in the future, a business credit card could give you access to additional cards for employees, complimentary business inconvenience insurance and unauthorised transaction insurance (which is not available if you add an additional cardholder to a personal account).
Personal vs business credit card application requirements
Another major difference with business credit cards is in the eligibility requirements – and in some cases this may answer your question about which type of card to apply for.
While personal credit cards have basic requirements around age, residency status and income, business credit cards typically add the requirement of an active ABN (Australian Business Number). The amount of time your business has been operating is also a common requirement. For example, you may need to show that your business has been trading for at least 12 months. You'll also need to confirm that you plan to use the account primarily for business spending.
As well as these requirements, some business credit cards only accept applications if your business is registered for GST and meets an annual turnover above the GST threshold of $75,000.
However, there are other business credit cards that don't include these requirements – such as the St.George Amplify business credit card and the Bankwest Low Rate Business Mastercard – so you still have options.
As freeing up cash flow is one of your priorities, it's worth mentioning credit limits. While you can find personal and business credit cards with both high and low minimum credit limits, you'll typically find higher minimum credit limits for business options. This is because these accounts are designed to support the high-volume spending that's often required when you run a business.
However, because you're applying as a sole trader and are not registered for GST, your account's credit limit will be determined based on the same factors – including your personal income, assets and debts or existing loans – regardless of whether you get a personal or business credit card. For larger businesses, being registered for GST and having a high annual turnover are both additional considerations that could lead to a high limit on a business credit card.
So, when it comes to the question of choosing between a personal and a business credit card, it's worth looking at the main expenses you'll be paying and what account features you want.
For example, if you're planning to use a credit card for payments to the ATO, a business credit card is more likely to earn you rewards. On the other hand, if a lot of your business expenses are processed overseas (or in a foreign currency), you could look at personal credit cards that offer 0% foreign transaction fees.
You might also want to consider your plans for the future. As you want to build your business into a full-time job, getting a business credit card that offers additional cardholders and expense management tools could be useful for keeping track of spending, managing your budget and submitting expense reports.
Based on what you've said, it's probably useful to compare a selection of both personal and business credit cards based on your priorities. I'd also recommend talking to an accountant about these different options so you can choose a card that fits with your financial circumstances and plans for the future.
Ask Finder is a regular column where Finder's expert writers answer your questions. All rates and fees are correct at time of publication and we only give general advice.
Do you have a question? Reach out in the comments or speak to someone from our 24/7 customer service team.