Paying for Business Expenses Applying for a business credit card is something a small business should seriously consider for itself. Business credit cards can provide a range of benefits to a business. They allow a company to build up credit for better borrowing conditions down the road. They’re also quite easy to apply for. In this article, we’ll go over how to apply for a business credit card and other important points to note. What Is a Business Credit Card? A business credit card is a credit card that is intended for business expenses. These cards are not meant for any individual’s personal use, but they are available to businesses of all sizes. What Is a Business Credit Card Used For? Business credit cards are meant for business expenses, and as such, they come with several perks that you wouldn’t get with a normal credit card. Business credit cards typically have far higher credit limits than normal cards, but they are also harder to qualify for. [youmaylike] As a business phenomenon, business credit cards vary their offers greatly, and certain cards are meant for certain businesses. They are also highly customizable when it comes to individual payment terms. Businesses don't always have consistent incomes like individuals do, and business credit cards handle this problem. These cards are used to gain access to a long line of credit, to control employee spending on business expenses and more. One of their other common uses is to make accounting easier, as putting all business expenses on one separate account makes reporting to the Internal Revenue Service easier. In the end, there are many uses for a business credit card. Why Would I Need a Business Credit Card? You might not need one, but if you run a business, you’ll be leaving money on the table by not at least looking into them. Business credit cards can solve many of the problems business owners face. If you need employees to make purchases for the business, a business credit card is the safest option. These cards can be given to authorized users, a status you can easily give to any of your employees. From here, these cards make it easy to monitor employee spending and spot any discrepancies. You can attach customized user privileges to each card to limit spending and place limits on where the card can be used. As mentioned, if you feel like your credit is too limited, business credit cards are a sure way around low credit. According to the American Bankers Association, the average monthly payment on a business credit card is twice as high as the average payment on a normal one. If you’ve found yourself annoyed with the Internal Revenue Service over the complicated reporting processes for business owners, you’re not alone. This is where a business credit card can solve another problem. Simply handing over your business credit card statements to your accountant will make them love you. It will also provide them with the information they need to predict future spending. Another great use for a business credit card is lifting your liability for debts. Liability for credit card debt is determined by the liability offered by the card. If you’re using a personal credit card for business expenses, you are liable for all debts. On the other hand, if you use a business credit card with commercial liability, your business is liable for any debts, which changes the game. Keep in mind that some cards offer joint liability, which leaves both you and your business liable for any debts. Make sure you know what you’re getting into before signing any paperwork. Lastly, just as personal credit cards offer rewards programs, so do business cards. The main difference here is that business credit card rewards are tailored to your business needs. How to Apply for a Business Credit Card Before you apply for a business credit card, you should make sure you’re eligible. For the most part, you only require the following to be able to apply for one: A legal name for your business. A business structure to apply with, such as a Limited Liability Corporation. An explanation of the nature of your business. You’ll typically be given a list of industry types to choose from. A tax ID number issued by the Internal Revenue Service Your roll in the business you’re representing Various business/financial information including: Annual revenue. Number of employees. Length of time in business. Estimated monthly expenses. If you have this information ready, you can apply for a business credit card. At this point, it would be wise to shop around and find the best option for your business. Your decision on the business credit card you choose will have larger ramifications than your choice of a personal credit card. Applying for a business credit card is much the same as applying for a personal one. There are a few differences, but the main thing to remember is that business credit cards are taken more seriously than normal ones, so you’ll have to face a higher bar of entry. This doesn’t mean getting a business credit card is hard, but it does mean you need to arrive more well-prepared than you normally would. To make things easier, you can prepare for certain obstacles in advance. You may need to sign a personal guarantee that you will pay off any debts. Also keep in mind that if you’re the one applying for a business credit card, and your business doesn’t already have one, they will conduct a personal credit check. It may be best to try to optimize your personal credit if you plan on applying for a business credit card in the future. Some Options at a Glance Here are some of the most popular options for small business credit cards: Chase Inc Business Preferred This is a great option for a few reasons. With the Business Preferred card from Chase Inc, you get 80,000 ultimate reward points when you spend $5,000 with the card in the first three months. The card also provides generic, but highly useful benefits for business owners. Business Platinum Card from American Express The Business Platinum is ideal for businesses that spend a lot on flights and travel. This card offers numerous rewards on flight and hotel expenses and makes sure you get something serious back if you use it for these expenses. Chase Inc Business Unlimited The Chase Inc Business Unlimited offers unlimited 1.5% cash back. While we’ve said enough already, they also offer several other perks that are overshadowed by their first one.
What Is a Balance Transfer Credit Card?
Credit card debt is one of the worst types of debts you can have. It’s hard to get ahead when you’re paying some unsecured creditor 1 to 2% each month on your unpaid balance.
Getting yourself out of a mountain of credit card debt is no easy feat. Something always seems to come up, temptations that threaten to keep you in debt forever. But the journey is worth it. There’s no better feeling than finally paying off those pesky cards. The additional cash flow freed up by finally ending those payments sure helps too.
One under-utilized trick many Americans use to pay off their credit card debt is to use a balance transfer to their advantage. Many folks ignore this powerful strategy because they’re worried about having another credit card. But when used right, a balance transfer credit card can take months off your debt repayment journey.
Let’s take a closer look at balance transfer credit cards, including how they work, the pros and cons of using one, how to get the best interest rates, and how they will impact your credit.
The Basics
A balance transfer credit card is a special kind of card that appeals directly to folks who already have a credit card balance.
These cards come with special advantages that are designed to entice people who are looking to pay off their credit card debt. Usually a balance transfer credit card will come with a low introductory interest rate — often as low as 0% — but for a short period of time. After six months or a year, the interest rate shoots back up to a regular rate. In fact, many balance transfer credit cards offer a worse rate than normal credit cards, since the issuer has to make back some of the interest they lost during the intro period.
The strategy to use such a card is simple. You transfer your debt from a regular credit card to a balance transfer one, locking in a period with an ultra-low interest rate. You then throw every nickel you can at that debt over the introductory period. It’s the perfect time to be aggressive, since every payment is going directly towards principal. Even if you don’t get the loan paid off in full, such a strategy should still be enough to save you some substantial interest costs. Especially if you’re sitting on a lot of debt.
The Pros and Cons of Using a Balance Transfer Credit Card
Let’s start with the advantages of using a balance transfer credit card, since they’re quite simple. The big reason why you’ll want to get one is because the strategy can allow you to pay off your debt much faster.
Depending on how much you owe, this simple debt busting strategy could easily save you hundreds (or even thousands) of dollars.
Many balance transfer credit cards also offer competitive interest rates once the special introductory period is over and offer various rewards for purchases. In other words, the card used to save a little money on interest could easily become your next credit card.
The biggest reason many folks don’t bother using balance transfer credit cards is the information factor. Every card has different rules. Some offer only a short introductory period. Others are much longer. Some offer a competitive interest rate when the introductory period comes to an end. Others don’t. And so on. Every card is unique, and there are dozens of different ones on the market today. Put it all together and it translates into an intimidating experience.
There’s also the time factor. It takes time to research a new credit card, apply for it and then take care of other minor details. It’s worth it if your credit card balance is approaching five figures, but many choose not to bother. Especially when the total interest savings might only be a couple hundred dollars.
Finally, you’ll want to make sure the card has a competitive rate once the introductory period expires. Just in case you don’t make quite as much progress as you hope. In fact, you may be better off sticking to your current card.
How to Find 0% Interest Offers on Balance Transfer Credit Cards
It doesn’t have to be complicated. Spend a little time with a credit card comparison tool and see what the various companies are offering. There will be 0% interest offers out there but be warned; not every company will offer such generous terms to try and get you as a customer.
Some balance transfer credit cards throw a bit of a curve ball designed to trick people. Many offer a 0% interest rate but will also charge you 3 to 5% of the total balance as a transfer fee. That’s a much better deal than paying 18 to 24% per year, but it’s still not ideal.
What About Your Credit Score?
Opening and closing credit cards are both actions that will impact your credit score. And not in a good way, either.
When you apply for a new credit card, the issuer will do a credit check. A “soft" credit check won’t impact your credit, but a “hard" check will. A credit card application will likely result in a hard credit check, which will push your score lower. Therefore, it’s important to pick a balance transfer credit card before you even apply. You just want one hard credit check on your credit report.
You’ll also experience a hit to your credit once you’ve paid off your debt and closed this new credit card down. This isn’t something to worry about; it’ll just be a temporary hit since the credit card was only held for a short amount of time. I’d think twice before closing any long-term credit cards, however.
The Bottom Line
They don’t get a lot of attention, but they should. When used properly, balance transfer credit cards can save you a bunch of cash and help you conquer that debt months sooner than simply paying off your existing card.
Just make sure to be careful before signing up for a balance transfer credit card. No two cards are created equal. Do a little research, crunch the numbers and make an informed decision. Take care to ensure you use this financial tool properly, or you may unnecessarily keep yourself in debt longer than anticipated. And if you haven't yet figured out how long it may take you to pay off your credit card debt, you can use our credit card debt calculator.