Many small business owners may know that having the ability to borrow on credit cards gives their companies far greater flexibility in handling the day-to-day transactions that are often necessary to run a business.
But the problem for many small businesses is that they might end up putting too much on their credit cards, as any consumer might do for their personal accounts. The problem with doing so on a business card is that they do not currently extend to companies the same protections from sizable rate increases and penalty charges that consumer accounts carry, and therefore debt that grows larger than expected or wanted can spiral out of control more quickly.
Fortunately, there are now credit cards designed specifically for these small businesses, which can help to get a company’s finances back in order in a relatively short period of time. These balance transfer credit cards can be beneficial because they come with low introductory interest rates, sometimes as little as 0 percent. These initial periods can last anywhere from six to 18 months, depending on the offer and the company’s credit standing.
During this time, businesses can start being more conscientious in paying down their credit card debt without piling up large amounts of interest on the balance they already owe, making it easier to reduce the principal quickly. However, while this type of account can be extremely beneficial to small business owners who are trying to reduce their outstanding debt over a relatively short period of time, there are also a few things to look out for.
[Credit Cards: Research and compare balance transfer credit cards at Credit.com.]
In nearly all cases, for example, the interest rate on a balance transfer may be 0 percent, but this will not include the one-time fee a business owner will need to pay for moving an existing debt to a new card. Usually, a balance transfer fee is about 3 percent of the total amount being transferred, so it’s important to know that this one-time charge is something that will need to be covered. In addition, balance transfer interest rates are typically not the same for new purchases made on those accounts, which can carry rates closer to those the business was paying on their old account. For this reason, it might be a good idea to avoid all spending on such a card for the first several months.
Image: Alex E. Proimos, via Flickr