Top Personal Finance Blogs
Friday November 17th 2017

Using Credit Cards to Finance Your Startup

Credit cards should never be considered your first choice for raising capital for your startup business. The risks in running your credit balances up are too high for a business that has not yet proven itself stable. That said, there are some situations that could benefit from the short term or carefully structured use of a credit card to cover certain costs. If you plan to use credit for business funding, track your purchases carefully and pay the cards down as soon as possible.

Recognize the Risk Up Front

A personal credit card can seem like a convenient way to cover many of the costs of starting your business. The trouble with using your own card for a brand new business is that you have no guarantee that your business will be able to pay the balance down within a reasonable amount of time. The safest way to gain capital for a startup is through a traditional small business loan through a bank you trust. The interest rates on credit cards can be as much as 10% higher than a standard loan’s interest rates, which means you will pay 10 times as much for your credit card loan over the long run.

Use Balance Transfers to Your Benefit

If you choose to carry a high balance on your credit card after purchasing items such as desks, office chairs, printers, computers, and other operating equipment, watch your balance and interest rates carefully. If you have more than one credit card, you might benefit from transferring the balance from one card to another. Many credit card companies offer special discounted rates for customers who transfer balances. The balance transfer could save you several months of high interest rates on your card’s balance.

Create a Plan for Paying off the Balance

Before you swipe the card for the business purchase, have a plan in place for paying the card off. You should be able to project your expected company earnings for the near future. Figure out how soon you can pay off the card’s balance in full based on your sales projections. Once you make the purchases, pay the minimum required payments on the card until you reach your expected payoff date. Always have a backup plan in case your company does not do as well as you expect it to do within the time frame you have selected.

Credit to Cover Cash Flow

One of the most powerful uses of a credit card for a business is as a stop gap cash flow resource. When you submit an invoice to a client, you never know how long it will actually take the client to pay you back. You can loan your company the amount of the invoice by using your credit card during the time between submitting the invoice and receiving payment. When the payment is received, you can use it to cover the charges you had to make with your card. The credit card can keep your company solvent without depending on the payment time frame of your client. Of course, this method relies on timely payments from your clients.

The bottom line is that using a credit card to finance your startup is a risky endeavor. Use your credit wisely and be careful to maintain full control lest the credit cards begin to inhibit your business growth.


Step-by-Step Guide to Lower Credit Card Interest Rates

Credit card companies compete with each other using their individual interest rates. The following is a method in which you can use a credit card company’s competitive mindset to lower your credit card interest rates.

Getting the Best Rate

Credit card companies are in the business of making money. If they could charge you a hundred percent interest rate they would. However, credit card companies are constantly competing with each other for customers on a daily basis. No one would use a credit card that charged a hundred percent interest, thus a credit card company with a hundred percent interest rate would become bankrupt in a matter of days. Just how much you do pay can depend on how far you’re willing to go to get the best rate.

Gather Your Information and Start Calling

First off you need to get your credit card statements together and call the customer service number that is list on your credit card statement. This will call will take a while and probably try your patience but it could save your hundreds of dollars in the future so stick with it. Go through the recording and push the necessary numbers until you get a hold of one of your credit card company’s representatives.

Negotiating a Better Rate

Now that you have an actual person on the phone you can start step two. Simply ask the representative to lower your credit card’s interest rate. Make sure you point out that you constantly pay your bill on time. If you make a lot of late payments you may be unable to lower your interest rate at all.

Be Nice

It is absolutely essential that you keep a polite tone. You are trying to get the credit card company to do you a favor; people do not do favors for people that show hostility towards them. Stay polite and the customer service representative will be more willing to help you out however he or she can.

Be Persistent

If your credit card company can’t lower your rate then request detailed information on why they aren’t willing to lower your interest rate and how you can qualify for a lower rate in the future. You may need to simply wait a few months before calling again. It is actually a good idea to call every few months whether they approve a lower interest rate or not. You want to get as close to zero percent as possible.

Lastly, pay your bill in full each month. If you pay your bill in full you make sure your credit card company doesn’t have a reason to increase your interest rate. The longer you pay your bill in full each month without any troubles the more of a reason your credit card company will have to lower your interest rate next time you call.

Politeness and manners are the keys to lowering your credit card interest rates. Those who ask nicely and frequently are more likely to receive lower credit card interest rates than those who demand and never ask. One phone call could save you hundreds of dollars each year


The Basics of Building Good Credit

People have been trying to build their credit since before the recession hit. A number of people ran their credit into the ground in the years before the economy took a tumble and a good many did so afterwards out of necessity. During these years thousands of teenagers graduated into adulthood to find they had no credit at all. Luckily, the credit building basics are the same whether you are starting with bad credit or no credit.

In order to start building your credit you need to limit the number of credit cards you possess. Until you have good credit you should only have one credit card. Having a bunch of credit cards at once is a bad mark on your credit report. This includes all kinds of credit cards such as gas cards and store cards. The discounts are not worth the hit to your credit. Stick to one credit card to cut down on your temptation to spend and repair your credit one purchase at a time.

You also need to set the credit limit on your card to no more than a thousand dollars. It would be best to set your limit to five hundred dollars but not everyone can handle such a small limit. You can usually call your credit card issuer, which is typically your bank, and request that your limit not be automatically increased as your credit rises. Setting your credit limit low will allow you to handle your payments easier and help you control your spending.

The most important part of building your credit is paying your balance in full each month. If you can do that then you are better off than most people that are already drowning in credit card debt. Paying your balance in full each month will show creditors that you are responsible in paying your monthly balance regularly. This is what ultimately leads to an increase in your credit score and makes your life a lot easier. You may find this easier to accomplish by only using your card to purchase things you can’t use cash to pay for or by only putting something you pay regularly on your card each month such as a phone bill.

As a final note, stay away from free offers that come with credit card applications. You may find the free stuff enticing and think you can simply cancel your credit card afterward, however; doing so will result in a hit to your credit that isn’t worth the free pizza or t-shirt. Unless it is a free car don’t fill out the application unless you plan to keep the card. Follow the aforementioned pointers and you are sure to build up good credit in no time.


Zero Percent Credit Cards are Back

Consumers with credit scores of 720 or higher may have an extra reason to celebrate this Christmas season. Zero percent credit cards are back and better than ever with many of them lasting for up to twenty-one months. That is a drastic increase from the fifteen month zero percent periods of last year. Initially these zero percent credit cards look like a blessing from above but this blessing is not for everyone.

Zero Chance Getting Zero Percent on Poor Credit

If your credit score is below 720 then the chances of you receiving a zero percent credit card is about the same as the card’s initial APR; zero. Credit card delinquency is down twenty-six percent from last year alone. Credit issuers are beginning to target prime burrowers in an attempt to increase profits as delinquency rates continue to fall. Unfortunately, this leaves out those whose credit scores were hit hard during the recent recession.

If your credit is better than 720, take a serious look at zero percent credit cards. Just because your credit score is so high doesn’t mean you are completely free of credit card debt. However, right now is a great time to transfer your debt to a zero percent credit card in order to save hundreds of dollars due you would normally pay due to interest. Twenty-one months without interest is a lot of money saved and a nice security net should you run into tough times and miss a payment during the promotional period. Zero percent credit cards don’t stay at zero forever but two years is a nice time to help get your finances in order.

The Catch

However, there is a catch. Transfer fees have increased to three to five percent no matter what company you transfer with. Which means you would have to pay up to two hundred and fifty dollars to transfer five thousand dollars. Transfer fee limits are, for the most part, a thing of the past.

A few card issuers offer a limit of only paying fifty dollars no matter what the transfer balance is but there is usually an annual fee or other catch that makes them not worth the trouble. Also, after the promotional period ends you will end up being charged the normal amount of interest for the entire balance that is left over. Meaning whatever you have left will be charged the same amount of interest it would have normally acquired during the twenty-one month period as soon as the promotional period is over.

Whether this is truly a good financial decision for you depends on your finances and deals you are offered. Zero percent credit cards are definitely worth another look.


Five Steps to a Better Credit Score

No it’s not a game. Although a credit score may seem like an abstract number with little relevance to your every day life, a low credit score may eventually have very negative ramifications. A credit score can be the determining factor of whether or not someone can afford a new home. A credit score is even used by some employers as part of the hiring process.
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Consumers Win on Credit Card Laws

The new US credit card reform laws that gave consumers some relief from credit card companies’ policies did not immediately bring on the predicted backlash expected. The new laws have restricted sudden hikes in interest rates, how payments are applied to accounts, and how over-the-limit fees are charged.

Why Credit Scores are Important

Today’s economy has everyone thinking about their financial standing. Along with having enough capital on hand to pay living expenses, stash some away for savings, plan for college, and hope to have a retirement fund, making sure that your credit score is in good condition almost gets lost in the shuffle. In fact, with all of this fancy financial footwork going on, it’s easy to forget how important having a good credit score really is.

What Does my Credit Score do, Again?

Credit scores, or FICO scores, are a calculated measurement of how likely an individual is to pay off a loan, and range from 300 to 850. Basically, money lenders use this number to decide how risky it is to loan you money. Those with higher scores are safer to loan to because in the past they have a solid history of paying loans back on time and in full, while those who have lower scores have had problems with complying with loan repayments in their credit history, making them riskier to loan to. Again, this risk is defined as the likelihood of the borrower paying back the amount in full.

Based on your riskiness—measured by your credit score—money lenders decide first if they will loan to you or not. If they decide to loan money to you, they go back and consult that credit score again to determine how high of an interest rate to charge you. Again, the higher the credit score, the lower the interest rate and the lower the score, the higher the interest rate. The reason for this is because the lender is taking on more risk by loaning to those with lower credit scores, and the return on a higher interest rate is their reward for assuming that additional risk.

Why do I care about an Interest Rate?

Borrowers should care about the interest rate they receive on a loan because this is the amount of money they will pay to the lender for the privilege of borrowing the money. The higher the interest rate, the more it will cost the borrower to borrow the money; the lower the interest rate, the less it will cost the borrower to borrow it. For example, a let’s say a person with a high credit score—700 or above—goes to the bank to borrow $1,000. The bank looks at their FICO score and sees that they are in excellent financial health and the likelihood of them getting their money back is very high, so this individual is a very low risk. As a result, they issue this customer the line of credit at 3%. This means that it will cost this customer $30 to borrow $1,000; a very good deal indeed. Next, another person walks into the bank looking to borrow $1,000. The bank pulls this person’s FICO score also, and finds that their number is very low—620 or lower—signifying to the bank that there are most likely going to be problems getting their money back. Even though this customer is risky, they decide to lend the money, but do so at a significantly higher rate: 10%. This means that it will cost this individual $100 to borrow $1,000. The bottom line here is that individuals should care about their credit score because it can save them money at a time when they probably need it the most—when they go to borrow money.

How can I Improve my Credit Score?

The number one way to improve your credit score is to make your payments on time; even if all you are doing is making the minimum required payment, do so on time. This shows potential creditors that you favorably abide by your financial contractual obligations.

The next piece of advice is don’t take too much credit out, or apply too often for credit. If you take too much credit out you run the risk of not being able to pay it off, which will hinder your progress towards the first point here. If you apply too often for credit, this lowers your credit score because research has shown that those who open a large amount of credit within a short period of time are less likely to pay any or all of it off.

Check your credit score often. You can check it yourself without injuring the score, so do so frequently. This will allow you to make corrections if errors appear, and keep you informed to your general creditworthiness. To do so, contact one of the three credit rating bureaus:

• Equifax. P.O. Box 740241, Atlanta, GA 30374-0241; (800) 685-1111
• Experian. P.O. Box 2002, Allen, TX 75013; (888) (397-3742)
• Trans Union. P.O. Box 1000, Chester, PA 19022; (800) 916-8800


Debt Boot Camp: 5 Things You Must Do Now!

Credit cards. Car payments. Home equity loans. No matter what kind of debt you have, working yourself out of it can seem overwhelming, especially as your balances grow.

It is possible to reduce and eliminate your debt. Don’t expect it to be a quick fix, though; paying off debt requires patience and perseverance. Below are five essential steps that will put you on the path to a debt-free lifestyle.

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Get Out of Credit Card Debt Now


It all begins so innocently. You whip out your credit card to pay for things like concert tickets, airline and hotels, ballgames, home improvements, etc. The next thing you know, it comes time to pay bills, and you’re paying a lot more than the original asking price of these items. We all do it, and most of us don’t feel good about it later on.

The convenience of paying for things with credit cards has become an American tradition. Worldwide, statistics are becoming overwhelming:

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