Congratulations if acquiring a 0% interest credit card for your small business is giving you the giddies! But, and there is always a "but" - BUYER BEWARE! While you may be thinking that now you can get those fancy promotional booklets you are needing or some nice new office chairs, you may not want to jump into a new contract so lightly.
If you are still considering applying for a 0% card, bear in mind that there is usually a 3% transfer fee for taking your debt on high-interest cards to the 0% cards. If you're like most small businesses, 3% is a lot lower than what you're currently paying. Keep in mind, though, that 0% interest credit cards are not for everyone. Armor yourself with knowledge on how this powerful piece of plastic works and you will be that much more savvy and successful in your financial small business affairs.
The 0% interest credit card is designed to pay off your large amounts of accumulated debt within your small business. It is not designed for making purchases or getting cash advances. If you use it for such, it is handled differently than a transferred debt payment; more than likely a “payment hierarchy” will come into effect.
This means a high interest rate will be tacked onto this purchase or cash advance. It also means the payments you make on your overall balance will not be allocated to this purchase or advance until the entirety of the transferred debt is paid off. In other words, you may find that purchases end up having the same high (or higher) interest rate of your standard rate cards.
A credit card company is big business. Its business is to make big money. Big business credit card companies can whittle away money from your small business while you are whistling Dixie. They will offer an exceptionally pretty package to distract you from a not-so-pretty gift. Be aware of the following list of silent stealers:
How much does the 0% interest credit card company charge for transferring debt? Is it a one-time flat rate or is it based on the amount of the debt you’re transferring? If it is a large debt, a possible 2-3% fee can be a sizeable chunk of change. Also, be aware that transferring debts can and does affect your credit score.
How much does it cost you annually to have this credit card? If there is a cost, what are the perks and benefits of making this payment? If an annual fee is suddenly imposed, make sure to question the credit card company’s reasoning. They are required to provide 45-day notice of this change and you do have the power to request a waiver or cut ties with the company. Be aware, again, that severing this relationship can hurt your credit score.
How long does the 0% interest rate last? Will it last 3 months, 6 months, an entire year? Can this offer be forfeited or not be applicable with certain purchases or deals? Be well-informed on this. Credit card companies get fat on your cash when you become comfortable in a notion that your small business debts are covered despite the fact that you can’t remember what month you signed a contract with them. They get a guaranteed 3% on your debt and all kinds of extra fees and interest if you mess up and violate their terms.
If you make a late payment, does your 0% interest rate disappear? Be aware that some credit card companies will strip you of that 0% rate and slap you with 12.99% interest on the first late payment. Pay late twice, and a not-so-nice 19.99% rate will go into effect. And, the late fee, in and of itself, will cost anywhere from $15 to $35. Also, be aware that it is not the company’s responsibility or requirement to send a bill to remind you of payment. Stay abreast of month-to-month changes and payments.
Having a 0% interest credit card can simplify your expenditures and save a lot on interest for your small business. In order to keep it simple, though, learn to study the fine print. These details will clarify how the big print may misrepresent. Knowing the details will keep you and your small business savvy and successful and free from unwanted expenses.