Using small business credit cards can be an excellent way to earn tons of rewards, but sometimes the balance and accruing interest might get out of hand warranting the use of what I call a 0 balance transfer credit cards short-term financial solution.
Unfortunately sometimes business slows or income stops and you’re left with more expenses than revenues.
If this happens in your business or personal life, consider applying for 0 Balance Transfer Credit Cards to tie you over for a brief period.
>Click here to compare and apply for 0 balance transfer credit cards<
This credit management strategy ONLY works if you’re certain revenues or income will increase in the near future so that you can pay off the balance. If not, then 0 balance transfer credit cards are not a good solution.
My 0 balance transfer credit cards experience
When I completed graduate school I had loans and my first-year salary wasn’t great. BUT, I knew my second-year salary would increase substantially, so I knew more money would be coming in in the near future.
With student loans kicking in, rent security deposit, new car purchase, work attire purchases – my bills mounted fast and high. I charged many of these expenses and knew I couldn’t pay them off in a month. I knew I’d carry a balance for several months.
Once my big-ticket expenditures were done, I applied for and obtained a 0 balance transfer credit card to which I transferred the bulk of my credit card debt.
For a period of 6 (or 12 months, I can’t remember now), I had no interest accruing as long as at the expiration of the grace period I paid off the balance.
I was fortunate because I received a large bump in pay within the year and then paid off the bulk of the balance on the 0 balance transfer credit card. I saved hundreds, if not thousands of dollars in interest with this strategy.
What are 0 Balance Transfer Credit Cards?
A 0 balance transfer credit card, also called a transfer interest-free credit card, you pay 0 percent interest on the credit card balance you transfer for a stipulated duration, usually anywhere from 3 to 15 months.
0 balance transfer credit card strategy overview
Transferring credit card debt after you apply for a 0 balance transfer credit card is only a strategy that should be undertaken when you expect an influx of cash BEFORE the 0 interest period expires.
Small Businesses in a pinch can use this strategy
Businesses, like individuals have income and expenses. Therefore, there’s no reason a small business can’t apply for 0 balance transfer credit cards and use a similar strategy. Again I stress, this strategy only works if you anticipate a large influx of cash in the near future to pay off the balance of the transferred credit.
If you don’t pay off the balance, chances are the interest rate on the 0 balance transfer credit cards will be higher than the interest rate of your original credit cards (this depends on the individual cards).
Examples when 0 balance transfer credit cards make sense for businesses
- If you have a large accounts receivable that will likely be collected – then apply for 0 balance transfer credit cards
- You have a healthy work-in-progress that will generate a bump in revenues in the near future – then apply for a 0 balance transfer credit card.
- You’ve closed a big deal that will generate more revenues in the near future. I wouldn’t use the 0 balance transfer credit cards strategy on deals that haven’t closed. Deals go sideways sometimes.
I wouldn’t use this strategy if you have a business credit card that has an obscenely low interest rate. The risk may not be worth it.
These are not an exhaustive list of examples or scenarios.
Also, if you receive great rewards on your small business credit card(s), be sure to check before transferring credit balances that you’ll still receive those rewards.
Examples when 0 balance transfer credit cards make sense for individuals
- If you’re assured a large bump in salary in the near future. Don’t operate on a maybe. Be sure it’s a done deal.
- You’ve earned and will receive a bonus in the near future.
- You have a new job that will pay more, but starts in the near future.
These are not an exhaustive list of examples or scenarios when it’s reasonable to apply for a 0 balance transfer credit card.
Pros to this credit card debt solution
You can save money on interest charges in the long run as long as you pay off all or most of the transferred balance before the expiration of the 0 percent interest period.
Protect your credit rating while in a cash pinch.
It can be convenient consolidating debt from several credit cards onto on card.
Free up access to credit. When you transfer a balance, you free up access to cash on your initial cards.
Cons to this credit card debt solution
You could lose money in the long run if you don’t pay off the transferred balance within the 0 percent interest rate period.
You may end up spending too much money with the freed-up credit cards.
Pitfalls to watch out for
- This is big: if you make purchases on the transfer card during the 0 percent interest rate period, you may likely pay interest on those purchases. Typically the 0 percent rate applies to transferred balances only.
- Don’t forget about the end of the 0 percent interest rate period.
- Transfer fees: Some 0 balance transfer credit cards have transfer fees. Check these out to ensure it still makes financial sense.
Tips before you apply for a 0 balance transfer credit card
Learn the card details such as:
- Can you transfer from a business credit card (if that is the case)?
- When is the expiration date of the 0 percent interest rate?
- How much is the interest rate when in effect?
- Are there any transfer fees? If so, how much?
- Are there annual fees? If so, how much?
- Will you lose credit card rewards on transferred balances?
- Talk to your accountant or financial planner before doing a balance transfer.
- Be certain you’ll receive that influx of cash before the 0 percent rate expires. If you can’t pay off the entire balance, does the deal still make sense.
Not all situations warrant this credit card debt solution, but as set out above, in some instances it does make financial sense.
How to apply for 0 balance transfer credit cards
Click here to compare and apply for 0 balance transfer credit cards to see if this is a credit card debt solution for you.
Disclaimer: This article is not intended to be financial and/or legal advice. It’s intended purely for informational purposes. Consult a finanical professional such as an accountant and/or financial planner before making significant financial decisions for your business or yourself.
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