Debt From Credit Card Can Be A Significant Liability
Credit card debt numbers in the trillions of dollars for US consumers. Once you have acquired one visa or MasterCard, it is incredibly easy to acquire others, including department store cards. The initial promise of low interest rates, often on par with the national banking rate, encourages consumers to sign up for, and use multiple cards.
Debt from credit card is often a huge problem for businesses. In fact, credit card debt is the number one cause of the failure of small to medium sized businesses in America. When a small to medium sized business first starts out, usually the owner uses their personal credit card to fund a variety of business expenditures. Often a business owner may get talked into acquiring more credit cards that they really don't want or need.
One of the key things to remember about credit card debt is that by paying off a credit card in full each month, you cannot be charged interest. If you anticipate not being able to pay off credit card debt in full each month, look for the lowest interest rate available. Many banks will come up with a lower interest rate, to keep a consumer or business owner from taking their custom elsewhere.
Choosing the right credit card as a small to medium sized business owner is paramount. The most common error made by new business owners, is to use their personal credit card for business expenses. Instead, a new business owner should apply for a business credit card that is not tied to their personal credit rating, but to their businesses credit rating. Acquiring a business credit card means you show your federal tax id and not your Social Security Number. Any credit card application that asks for your Social Security Number is not a business credit card.
Keeping debt from credit cards to only one or two cards with a fixed interest rate is a smart way for a business to use credit and build its credit rating at the same time.
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