Top Personal Finance Blogs
Tuesday September 26th 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.


Put a Leash on It! Top Five Tips for Controlling Your Debt

Americans are facing an unprecedented level of debt. From credit cards to second mortgages, the majority of the country is in over its head. Here are five ways to get a handle on your debt and keep it under control.

Understand Good Debt vs. Bad Debt

There is such a thing as good debt. Investing in a mortgage or purchasing a car are ways that you can increase your credit rating and purchase expensive items that you need. Make sure you research the best rate options before you sign on for a large loan. Bad debt that should be avoided is usually in the form of high interest rates from credit cards. Try to pay for daily items with cash, and never buy anything with a credit card that you won’t be able to pay for by the end of the month.

Organize Spending Habits

Have a plan for your money. All of those small items that you pick up during the week are inexpensive one at a time, but they add up quickly. Make a realistic budget that includes all of the things you expect to purchase on a regular basis – including that danish with your coffee on Friday mornings.

Always Pay More than the Minimum

If you are carrying a revolving balance on your credit cards, always pay more than the minimum every month. Usually the minimum will only cover your interest payment on the balance. In order to make some headway into the principle balance, you will need to pay more than the minimum requirement.

Be Ready for Emergencies

It is important to be prepared for unexpected emergencies. Most financial planners recommend that you keep a savings account that is large enough to cover your expenses for three months. This safety net will provide you with the money you need in an emergency without having to resort to credit cards or other financial pitfalls.

Pay Debt Down in the Proper Order

How you pay your debt off is important. Begin by paying off the loans or credit cards that have the highest interest rate. Your debt will drop much faster as you reduce the balances on those loans because the interest that you are paying will be reduced right away. A good strategy is to make larger payments on one high interest loan and at least the minimum on your other loans. As you pay one off, you can start on the next one in the list.


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


What to do When You Can’t Pay the Minimum

It can happen to the best of us. For some reason or another you are unable to make your minimum credit card payment. As long as this only happens once in a blue moon you are okay; do not make it a regular occurrence or you will find yourself grave deep in debt. It is easy to just your minimum credit card payment if you can’t afford it and just go with the consequences. It is also incredibly stupid to do as well. If you find yourself in danger of missing your monthly minimum credit card payment follow the tips below to minimize its impact on your finances and credit score.

Be Proactive

The first action you need to take when you know you are going to miss your monthly minimum credit card payment is to call your creditor. Explain the situation you are in and why you can’t make your payment. Most creditors will waive the late fee and extend your due date as long as it is a one-time occurrence. The majority of creditors will also refrain from reporting late payments to credit bureaus. This is not guaranteed to occur. You may call and your creditor says they can’t do anything for you. However, if you choose not to call at all you will definitely be hit with the full extent of late payment penalties.

There’s Always a Way

Should you end up with a creditor that refuses to show any leniency you need to find a way to pay your minimum any way you can. You can try to find a friend or family member to burrow from, sell some items that are just collecting dust, get and advance on your next paycheck, or find a way to make a little extra money. It is important to keep any blemish you can from your credit score. The road to ruined credit often occurs from one missed payment slowly turning into more. Make the payment anyway you can.

Be Sensible

Do not put off other important bills to pay your credit card payment. While it is important to keep good credit, it is not worth losing your water or electricity. Should you find yourself falling behind regularly then you may need to try to work out alternative payments with your creditors or see a credit counselor as soon as possible. With a little proactive work you can to preserve your credit standing without sacrificing necessities. Do what you have to in order to stay in good credit today.


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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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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