Many business owners find that business credit cards are a great way to manage their company’s expenses. They also allow them to take advantage of benefits and rewards. However, this method of financing can obviously get out of control and rack up a lot of debt in the process. This is where a balance transfer comes into play.
What is a balance transfer?
While some business cards seem attractive because they offer 0% APR initially to get you started, this can quickly jump to charging an APR upwards of 20%. This can cost your business hundreds or even thousands of dollars in interest over the course of just one year. To avoid letting your debt get out of control, it’s important to have a plan. This is where a balance transfer can help you.
A balance transfer allows you to take high-interest credit card debt and move it to another credit card account. Of course, you will want to transfer the balance to a card with a lower APR. A great way to make this transfer work for you is to use the introductory 0% APR promotion period to pay down your balance interest fee.
Have more than one card? No problem. You can transfer multiple business credit cards with a balance to one card. This will simplify your monthly payment and help you get debt under control.
Is a balance transfer right for you?
It’s important to understand that a balance transfer is not a guaranteed way to eliminate credit card debt. Simply transferring the balance is not enough. It is critical to have a plan in place before the balance transfer. Otherwise, you could easily end up right back where you started – but with more debt.
Also, balance transfers are not free. Typically, you will be charged a fee of 3 – 5% of the transfer amount. While this cost may be well worth it, it is still important to know and to factor into your plan for paying off the balance.
Here are three questions to ask yourself before committing to a balance transfer:
- How much debt do you have? If you only have a couple thousand dollars that can be paid back in less than six months, a balance transfer may not make sense for you. The costs may actually outweigh the savings in such a scenario. Then again, you may be limited on how much you can transfer. The key is to be aware of your options.
- What is your credit score? Typically, business credit cards require a personal guarantee. So, don’t be surprised if, when you request a business balance transfer, you are required to have good or excellent credit (670 or higher). If your credit score sits well below that number, you will more than likely have to wait until you can raise your score.
- What is your repayment strategy? All in all, any decision you make needs to be supported by a debt payoff plan to be successful. If not, a balance transfer simply won’t solve your debt problem for you.
Where to turn to next?
If you feel that a balance transfer is not right for you, you need cash now, or credit is a problem, consider an alternative option. A merchant cash advance bad credit, for example, is quick solution that is easy to apply for. Regardless of poor credit, your business can have cash in as little as 24 hours. Applying with First American Merchant is known for being a simple, fast and hassle-free process. Bottom line: make sure you know all the ins and outs of each option available to you, so you pick the right solution for your business’ future.