Ask Yourself These 5 Questions Before Doing Anything
At some point, every business considers the benefits of a credit card.
With so many credit cards to choose from, you can likely find one that suits the every want and need of your company.
But, just the same as a personal credit card, business debt can pile up over time.
Soon enough, you are looking at your credit card statement and wondering what happened.
At this point, you have a few options:
- Pay off the entire amount (if you have the resources to do so)
- Continue to pay the minimum, realizing it will take a long time to eliminate the balance
- Refinance your business credit card debt to save on interest
There are pros and cons of all three options. For example, paying off your balance in its entirety allows you to get this debt off your books. The downside is that you will have to part with cold hard cash to make this happen.
On the surface, paying the minimum sounds like a good idea. You only have to shell out a few dollars every month to keep the credit card company off your back. Here is the trouble with this strategy: it will take years to pay off the debt, thanks to the interest that continues to mount.
Your final option is to refinance business credit card debt. The primary benefit of doing so is the ability to save on interest. The principal will remain the same, but a lower rate puts you in a position to eliminate or reduce the amount of interest paid each month.
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Should You Refinance?
If you are leaning towards the refinance option, here is the question you need to answer: can you get a lower APR than you are currently paying?
If the answer is yes, it is time to strongly consider this idea. If the answer is no, there is not much point in refinancing, unless you are trying to consolidate payments.
Some companies only have one business credit card. This makes the refinance process cut and dry. If you can swap your current credit card for one with a lower rate, it makes a lot of sense to do so.
But what if you have multiple business credit cards? How will you deal with this? If the numbers work out, transferring the balance to one card could be in your best interest. This allows you to put all your credit card debt under one roof. Not to mention the fact that you may find a zero percent balance transfer offer. This gives you the opportunity to avoid interest payments for a predetermined period, often as long as 12 to 18 months.
How to Get Started
Once you do all your homework, once you realize that refinancing your business credit card debt is the right decision, it is time to move forward. This may sound like a lot of work, but once you learn how simple it can be there is nothing that will hold you back.
Here are the three steps you should take:
- Search for a new business credit card that suits your needs. Not only should the interest rate be lower, but you must be comfortable with the other features of the credit card. Consider details such as the rate after the introductory offer expires annual fee and any perks.
- Contact the credit card company for information on how the refinancing process works. Let them know that you want to consolidate your business credit card debt to a lower interest rate card. They should be able to obtain the necessary information, tell you which offers you qualify for, and help you understand how you will save.
- Do the math. It is easy to get excited about this strategy for reducing your business credit card debt. Even so, don’t assume it will work in your favor. There are times when this is the best decision, as well as situations in which it will not work no matter how you look at it.
Answer These Questions
By now, you have a solid grasp of what this process entails. You know what to look at, how to address your situation, and the benefits refinancing could bring to your company.
If you remain on the fence, wondering if now is the best time to refinance your business credit card debt, answer these five questions:
- What is your current balance? If it is low enough to eliminate in the near future, the hassle of refinancing may not be worth the time.
- What is your current interest rate? The higher the rate, the more sense it makes to search for a better opportunity.
- How many credit cards does your business have? The more open accounts you have, the more difficult it is to track your debt and make the appropriate payments.
- Can you find a business credit card offer that makes sense? It takes some searching around to find an offer that allows you to refinance your debt at a lower rate.
- What is the process for getting started? As a business owner, you have many responsibilities on your plate. You need to make sure you have the time to handle this task with success.
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Deciding if you should refinance your business credit card debt does not have to be a lengthy, stressful process. You know the pros and cons. You know when this makes sense. Now, it is time to decide if you are going to take the leap. Remember this: the numbers don’t lie!