Information Center – News and Articles about Credit Cards
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Credit Card Applications to Get Your Business off the Ground
Whoever said starting a small business was easy never tried to start a small business. Heck, even the large corporations suffer major setbacks from time to time. Anyone notice what's going with Ford Motor Company right now. So if Ford is having a hard time, how do you expect to make a million dollars from the comfort of your garage? Small business credit cards can help.
Instead of waiting for the Small Business Administration to help with a loan, why not go the way of moguls like Bill Gates and Donald Trump...use someone else's money. This, in essence, is what you are using if you use credit cards specifically designed for the small business owner. If it works, for the Donald, it can work for you.
The small business credit card is more than a shiny piece of plastic to help impress a client, it can be used to track expenses, give you a monthly itemized bill of all your expenses and land substantial discounts on numerous products of interest to the small business owner.
According to the most recent study from The Small business Monitor (and sponsored by American Express), 78-percent of small business owners credit and charge cards to help them manage their finances wisely. But probably the biggest benefit of using a small business credit card is the float time built in between paying vendors and paying your credit card bill.
Other findings from the study:
- 31-percent will purchase computer equipment
- 47-percent use their cards for office supplies and entertainment
- 42-percent use their small business credit card for wholesale purchases
- 22-percent use their credit cards for business professional services
- But the most common purchase is travel. More than 55-percent of small business owners use their business credit cards for travel.
Advantages of a Small Business Credit Card
Business credit cards have myriad advantages, including, but not limited to:
Using a credit card to make large purchases frees up your cash flow.
- Purchasing items from around the globe is now as easy as heading down to the corner store.
- Tracking expenses with a monthly statement and using on-line bill pay make accounting a breeze. Most lenders will send you a year-end statement, which saves time during tax season. Some cards even come with financial software to help you manage your money.
- Credit cards help manage employee spending rather than fumbling with petty cash or reimbursement accounts. And, you can request additional cards with pre-set limits.
- Most cards offer reward and discount programs, including mileage points, travel insurance, and discounts on business services ranging from shipping to software solutions.
- Many lenders offer zero-percent interest rates and no annual fees. And business credit cards generally have higher limits than personal credit cards.
- A small business credit card can help you build good credit for larger bank loans as your business grows.
Small Business Credit Cards Might Lead to Financial Downfall
Before you commit to any one credit card company for your small business credit card, you should consider the following:
- To qualify, your personal credit history should be outstanding. Keep in mind that your credit will be at risk and may be limited until you establish a separate and viable credit history for your company. Establishing business credit cards and lines of credit can help you accomplish just that. Until such time, if your business does go belly up, expect creditors to come after you and your personal assets.
- Keep in mind that large business debt can have a negative impact on your personal credit record, so use the credit wisely and within reason or you could end up worse off than when you started.
- Make payments on time to keep your credit score from being affected. If you pay late it will allow lenders to bump up that zero-percent interest rate. Pay off the card in full each month, if possible. A failure to do so can end up costing you more to use the credit than it is really worth.
- With a business credit card there is no real consumer protection if you need to dispute a billing error. Check first with each lender, as conditions will vary.
- Avoid using cash advance offers - the associated fees can add up quickly. Equally important, don't go overboard and be tempted to sign up for more cards than you need. When it comes to business credit cards, less is better than more.
Bottom line, if used wisely, small business credit cards can enhance your company image, allowing your small business to take on larger, more lucrative projects and grow to Gates-like proportions.
Most credit tips say that the sooner you pay off your credit card balance - the less money you will lose on interest. On-time payments will favorably bound back on your credit score and payment history. This kind of advice is what we all are used to hear and read on the Web, in financial magazines, in tips columns. But does this financial behavior model really have a positive effect on your FICO score and credit report?
How can it be questioned, you ask? A perfectly disciplined plastic owner that pays off his or her balance before a lender could say Jack Robinson. Is not it any creditor's dream? No, it is not always so. Let's find out why a lender would want a different behavior model from a borrower and when this kind of paying down debts can weigh heavily against a cardholder.
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There are a number of embarrassing situations that are just a nightmare for cardholder. Feel no wallet in your pocket just before the cash register? See some unauthorized charges in your credit report? Loose you wallet with all your plastics in it? Very soon we are going to have no fear of these things, thanks to amazing technical progress.
Indivos Corp. which majors in computer hardware and software development has been working on an electronic system for making payments over a number of years. The thing about this system is that it enables transactions to be made by scanning customers' fingertips. A number of retailers have already expressed interest in testing the new system.
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Active credit card use is a sign of a society with well-developed market relationships. More and more people get involved in buying goods and services with plastics. Using virtual funds to make real purchases is very convenient. But this extended buying power has led Americans to a dangerous trend. Over 40% of American households, according to the USA Federal Reserve statistics, spend more money than they make.
In the average, every American of these 40% spends $1.2 per every $1 he or she earns. Plastics have changed people's spending habits. These plastic devices allow and encourage people to spend more and more money. Around 18% of all purchases made by Americans involve credit card use. About 24% of the purchases are made with other types of plastics.
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If you are determined to eliminate your credit card debts and you have good credit, getting a balance transfer card is a good idea. You can shift your credit card balances with high interest rate to a card with much lower rate or 0% APR at all. But there is one thing that can reduce your profit from this kind of a deal. It is balance transfer fee.
Most balance transfer cards come with a fee for a transfer. Not long ago you could easily find a plastic for balance transfers with no fee. However, due to the credit card market crisis and economy slowdown, lenders have pulled these deals from the market. And now it is rather hard for a customer to find a balance transfer card that comes with no fee. But there are some ways to negotiate a better balance transfer deal.
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