Everyday your mailbox is packed with junk mail trying to convince you to sign up for a new small business credit card.
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Most of these small business credit card offers can quickly be weeded out, but the ones offering low rates with no fees for balance transfers always catch your eye. Are these deals for real, or is there something you are missing?
It's just common sense that there is usually more to a 0% APR, no balance transfer fee credit card than meets the eye. Credit card issuers aren't charities. They are profit-making ventures, and if they aren't earning interest or fees on your balance, how do they make money? The simple truth is that credit card companies are banking on the hope that you won't read the fine print. You have to stay one step ahead of them, and make sure you know what you're getting into before you act on their offer.
Business Credit Card Transfer Fees
For starters, you need to understand that a 0% interest rate card does not automatically mean that there will be no fees applied to balances transferred from another credit card. It is possible to find credit cards with no transfer fees, but you have to make sure that is explicitly stated in the terms and conditions of the account. If transfer fees do apply, expect to pay around 3% of the balance transferred.
Business Credit Card Rates
Conversely, a card that promises no fees for balance transfers doesn't guarantee a low interest rate on future purchases. Credit card companies often mask high interest rates with perks and rewards, including balance transfer enticements. Double check the terms to ensure that you won't be raked over the coals when you use the card to make your first purchase.
Business Credit Card Penalties
Even if you peruse the terms and conditions of the credit card with a fine tooth comb, the credit card companies still have a couple of tricks up their sleeves. One of the most common snags happens when cardholders fail to live up to their side of the bargain. Favorable terms are granted on the basis of full compliance with the terms of the account. In other words, miss just one payment and the rate on your 0% APR credit card will quickly skyrocket. So if you find a great deal, don't blow it by making a stupid mistake.
One of the criteria used to determine your credit rating is your credit utilization – the amount of available credit you are currently using. If you max out your credit card through no fee balance transfers and then close the original credit card account, it can negatively impact your credit score. On the other hand, if you transfer your balance to the new card, but still maintain the old card with little or no remaining balance, your credit rating can actually increase. Either way, it's worth it to think through the credit ramifications of your decision.