Credit Cards For Small Business – Is A Personal Credit Card OK?

Small business credit cards are often considered by Australians looking to start their own business. The question is, do we really need a specific credit card designed for small businesses, or can we get by on a personal credit card instead?

If you are planning to start a small business and you are looking for funds and starting capital, you might be tempted to use your personal credit cards with varying credit limits. You don’t want to take a new loan and aside from that, you also don’t have enough savings for the expenses you will incur for your small business. So what can you do to get by in those early – and important days of business? Read on…

Business Credit Card Comparison

			Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
	Citibank CitiBusiness Gold	Earn 1.25 reward points for every $1 spent – with no point expiry. 1 reward point is redeemable for 1 frequent flyer point among other rewards. Access up to $60,000 in credit limit. Complimentary International Travel Insurance and Business Concierge service.	0% for 4 months (reverts to 20.74% )	0% for 4 months	$149(half-price annual fee in the first year)	21.49%
	American Express Platinum Business Card	Better track and manage your business expenses with the American Express Platinum Business Card	%		$1200
	American Express Gold Business Card	Reward yourself and earn 25,000 bonus points when you spend $50,000 each year.	%		$169
	American Express Qantas Business Card	Earn Qantas Frequent Flyer points on every dollar spent with the AMEX Qantas Business Card. Redeem for Qantas and Jetstar Any Seat Rewards.	%		$299
	American Express Business Accelerator Credit Card	Receive 2 Membership Rewards points for every $1 dollar spent	20.74%		$160
	American Express Velocity Business Card	A truly dedicated business rewards credit card. Download all your card expenses in a format readable by Quicken, MYOB, Microsoft Excel and more.	%		$249

Advantages and disadvantages of using personal credit cards for your business:

Personal credit card use for financing a business can be very risky, especially if you are not so sure if your business will be successful in the long run. Aside from that, you can’t be assured that you will be able to immediately pay for your debts and keep your personal credit history clean because it can take some time to make your business a success. If you are not sure your business will be able to cover all of the start-up expenses then don’t risk damaging your personal credit history by using a personal credit card.

Various factors have to be considered; how to best pay off your debt and current credit card interest rates. If you plan to use a credit card with low interest rates, then it is almost the same as getting a personal loan. It is important to do your research and find a credit card with a low interest rate to justify your decision to apply for a credit card more viable than applying for a personal loan.

Although there are obviously some disadvantages, there are also advantages when it comes to using personal credit cards for small business with the most obvious being to have instant access to funds. One clear advantage is that you don’t need to apply for additional financing that will appear on your credit file.

Guidelines for using small business credit cards:

Here are some tips for using credit cards in your small business:

• Try not to miscalculate your expenses. You might want to seek out professional financial assistance to help you set a realistic budget. If you don’t, you might end up with business debt that could have been prevented with the right planning.
• Do not forget to include the costs for operation. When the beginning phase of your business is over, it doesn’t mean your expenses will stop. You will still need money to pay for ongoing expenses such as utility fees, leases, as well as employee salaries.
• Do not rely solely on credit cards. For example, if you do not have enough cash when you are making smaller purchases for your business you can use your credit cards temporarily. The dangers of using credit cards for small business are found in debt accumulation if you mis-handle your finances.
• Don’t use your credit card if you won’t be able to pay for it. You might be tempted to pay for large amounts of expenses using your credit card. However, if you won’t be able to pay the card off each month, you might as well drop the idea of using your credit card for these business expenses.
• Use an alternative to credit cards. If you plan to use your personal credit cards to finance your business then you may do so, as long as you are able to pay the card off each month to avoid interest charges and debt. One example is to use the card as a temporary source of funds while waiting for your loan to be approved.

In general, using your personal credit card as your main financial source for starting up a small business can be very risky. If you are going to use your personal credit card, you have to make sure that it will be your last resort.

Understand exactly how small business credit cards can help you financially by reading our Guide to Business Credit Cards for Small Business.

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Popular Credit Card Offers

			Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
	Westpac Low Rate Card - 0% Offer	A credit card with a low rate offer on both balance transfers and purchases, plus a low annual fee.	0% for 6 months (reverts to 13.49% )	0% for 6 months	$45	21.49%
	Citibank Clear Platinum Card	Competitive interest rate on purchases and balance transfers offer.	11.99%	2.9% for 12 months	$99	21.74%
	St George Vertigo	Take advantage of this great offer from St.George with a low rate on purchases and a low balance transfer offer.	13.24%	0.99% for 12 months	$55	21.49%
	ANZ Platinum Credit Card	An introductory interest rate offer on balance transfers and purchases, plus a $0 first year annual fee.	0% for 6 months (reverts to 19.24% )	0% for 6 months	$0 annual fee for the first year( $87 thereafter)	20.99%