Balance Transfer to Business Credit Cards
Do you have personal credit card debt acquired from business related expenses?
Do you have business debts reporting on your personal credit?
If you’ve been using personal credit cards for business expenses, you should balance transfer any outstanding debt to a new business credit card account. Most importantly, the new business credit card account should only report to the business credit reporting agencies.
We’ll discuss how to get business credit reporting cards later on in this post.
When you transfer the balance from a personal credit card to a business credit card that reports only to the business credit reporting agencies it comes with many benefits. The process itself is easy, but you must make sure the new business credit card is only a business reporting card.
In today’s post we’ll cover 5 major benefits when you do a balance transfer to business credit cards.
1) Separate Personal and Business Credit – With a business credit card you can stop using personal credit cards for business transactions. This is the easiest way to create a clear separation between personal and business expenses.
In addition, you can protect your personal credit if you balance transfer to business credit cards that don’t report to your personal credit reports.
What better way to keeping your personal and business completely separate than by separating expenses, credit cards and credit reporting. So, if you have debt on your personal credit cards that are from business related purchases you should balance transfer that debt to business credit reporting cards.
2) Lower Your Per-Card Utilization Ratio – The credit utilization ratio for each of your credit accounts is called your per-card ratio. You can calculate your per-card ratio by taking the amount you owe on a card and divide it by your credit limit on that card.
For example, if you have a personal credit card with a $10k credit limit and your current balance is $5k, your per-card ratio for that account is at 50%.
Now let’s say the $5k balance on that personal card was from business related purchases. If you balance transfer that $5k to a business credit card your per-card ratio for that personal credit card will drop to 0%.
A low per-card ratio shows you’re using less of your available credit. This not only has a direct impact to your credit scores but also indicates you’re doing a good job at managing your personal credit.
3) Lower Overall Credit Utilization Ratio – Your overall credit utilization ratio is the amount of revolving credit you’re currently using divided by the total amount of revolving credit you have available.
For example, if you have a total of $20k in credit available on three credit cards, and a balance of $5k on one card and $5k on a second card, your overall credit utilization ratio is 50%. Basically, you’re using half of the total amount of revolving credit you have available.
Now let’s say the $10k total balance on two of those personal cards was from business related purchases. If you balance transfer that $10k to a business credit card your overall credit utilization ratio will drop to 0%.
A low overall credit utilization ratio shows you’re using less of your total revolving credit you have available. This not only has a direct impact to your personal credit scores but also indicates you’re doing a good job at managing your personal credit overall.
4) Improve Personal Credit Scores – Credit scoring models such as FICO® consider your per-card utilization ratio and overall credit utilization ratio when calculating personal credit scores. These ratios can impact up to 30% of your credit score.
In fact, credit utilization ratios are one of the most influential factors that make up your credit scores. Remember, credit utilization ratios are based only on revolving credit – basically your personal credit cards and personal lines of credit.
When you balance transfer personal credit card debt from business related purchases to business credit cards that only report to the business credit reporting agencies your per-card and overall credit utilization improves.
Ultimately this strategy will improve your personal credit scores significantly because you are lowering your credit utilization ratios. If the balance transfer drops your credit utilization ratio dramatically than you can see a major increase to your credit scores.
5) Save Money on Interest – A balance transfer to business credit cards can save you money on interest. By moving high-interest credit card debt from business related purchases to a business credit card with a lower rate – or better yet, a 0% introductory APR period – can save you thousands of dollars while making it easier to pay down your business debts.
With our business credit card funding program, we set your company up with 4-5 business credit cards that only report to the business credit reporting agencies. These revolving business credit lines can transform your business in more ways than one.
Each of the business cards will come with a 0% introductory APR period for a period of 6-15 months depending on the card issuer. Keep in mind most cards charge a balance transfer fee of 3%.
For example, let’s say you have a $5,000 balance on a personal credit card from business related purchases and the card charges 15% interest. If you balance transfer the $5k to a business credit card with 0% APR for 12 months then you would pay no interest during those 12 months.
All the money you don’t have to pay in interest is money you can use to pay down your business debts faster. Remember, the process of performing a balance transfer to business credit cards doesn’t pay down your debt.
This strategy simply moves the business debts on personal credit cards to where it should be; on business credit cards. More importantly, business credit cards that only report to business credit agencies not your personal credit.
On a final note, a balance transfer to business credit cards will also build your business credit file. When you make monthly payments to business credit reporting cards the payment activity will report to business agencies such as Experian Commercial.
Remember, the key to effectively doing a balance transfer to business credit cards is using business credit reporting cards. Doing so will enable you to reap all the benefits of business credit listed in this post. Be sure to check out our business credit cards program and get pre-qualified today.
Read to apply for business credit reporting cards that build your business credit? Submit your information below and a funding specialist will contact you within 24 hours. Plus receive my FREE business credit seminar audio & newsletter ($597 value) =>
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About the author
Marco Carbajo is a business credit expert, author, speaker, and founder of the Business Credit Insiders Circle. He is a business credit blogger for Dun and Bradstreet Credibility Corp, the SBA.gov Community, Business.com, About.com and All Business.com. His articles and blog; Business Credit Blogger.com, have been featured in ‘Fox Small Business’, ‘American Express Small Business’, ‘Business Week’, ‘The Washington Post’, ‘The New York Times’, ‘The San Francisco Tribune’,‘Alltop’, and ‘Entrepreneur Connect’.