And I do mean vengeance. The terms on some of these are absolutely putrid and can sprint you into a financial hole with the quickness.
The big problem is…
SMALL BUSINESS CREDIT CARDS AREN’T covered by the consumer credit card law passed in 2011.
So be careful. Some local business owners are using their small business credit cards to purchase things they can pay in full each month (not carrying a balance). For other expenses they’re using personal credit cards.
This can be a bear come tax time but the protections are worth it. Your business credit card you still had to sign for personally. So might as well protect yourself.
I know you don’t have time to read the fine print but at least look at these highlights:
1. Interest Rate
2. Balance Transfer Fees and Rate
3. Annual Fee – if it has 1 trash it. Only gold or black cards are worth further investigation because of their added perks. Though they carry annual fees their benefits may outweigh the cost.
4. Cash Advance Interest Rate
Just flip the application you get in the mail over on the back to see the table with these numbers in them. You can quickly scan for this vital info and make a good snap decision.
Excerpt from Smart Money:
“Lenders are courting small-business owners like you with growing numbers of new credit cards and generous rewards programs.
And it’s easy to see why. About 42% of small-business owners carry a credit-card balance, according to July 2011 data from the National Small Business Association in Washington, D.C.
But the cards often lack consumer protections and thus, they can hurt or destroy your credit score.
Indeed, critics say lenders are turning to small-business cards because they have fewer consumer protections. Small-business credit cards were excluded from the Credit Card Accountability Responsibility and Disclosure Act of 2009 that outlawed random interest-rate hikes and other practices on personal credit cards.
On consumer cards, issuers can’t raise that interest rate on existing balances unless the cardholder is at least 60 days late with a payment. But on small-business cards, issuers can change it whenever they’d like, according to Odysseas Papadimitriou, chief executive at CardHub.com, a credit-card comparison website.
If you are paying two different interest rates — one on purchases and another on a balance — the monthly payment that is above the minimum required could be applied to the balance with the lower interest rate first, according to Bill Hardekopf, chief executive at LowCards.com, which tracks credit card offers, including those aimed specifically at small-business owners.
In contrast, personal credit cards must apply the payment to the higher rate first to lessen the costs for the borrower.
Bank of America chose to apply all the major provisions of this law to its small-business credit cards and Capital One has to a lesser extent. But most major lenders haven’t, according to an April 2011 study from CardHub.com.
You also have to consider how small-business credit cards will impact your credit score. Even though they’re pegged to small-business spending rather than personal spending, in almost all cases, you, the business owner who signs up for a business card, are personally liable. (The lenders say the small business is also held responsible, though in most cases that boils down to the owner.)
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Full story is here.
You have many different strategies and financing options to operate your business. Taking into account risk, the blended strategy of business credit card (pay balance in full each month) and personal credit card (for expenses financed over time) seems to be the ideal for your protection and maximum ROI.
