Business credit card balance transfers
If you're paying interest on business expenses, switching to a credit card with a balance transfer offer gives you a way to save – here's how.
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Every dollar counts when you're running a business. So if you already have business debt on a credit card, moving it to a new card with a low or 0% introductory interest rate can help you save on charges as you pay it off.
It can also free up cash flow, reduce debt and even improve your credit score. While there are plenty of personal credit cards with balance transfer offers, it's not as common on business credit cards. So, let's take a look at your options.
Four reasons your business might need a balance transfer credit card
- Cash flow issues. If your business is struggling with liquidity, a balance transfer credit card can provide short-term relief by freeing up cash that would otherwise be spent on interest charges. This can help meet short-term or cyclical needs, until the business can create a sustainable positive cash flow.
- Startup expenses. If your business is relatively new, it might not generate sufficient income to meet your capital expenses or bills. Moving any expenses you've already paid onto a business credit card that includes a balance transfer offer allows you to pay either 0% or low interest on those expenses for a promotional period.
- Consolidate existing debts. If you struggle with several existing credit card interest repayments, you could transfer them all to a single account with a low or 0% interest, using a balance transfer offer. Not only will this make it easier to keep track of your debts, but it should allow you to repay your consolidated debt much faster than if the amounts owing are separated into different accounts that charge separate, higher interest rates.
- Improve credit score. Related to the above, you can help strengthen your credit score if you’re making timely repayments and can repay your debt with a balance transfer offer. Plus, your credit utilisation ratio also improves when you have a new credit card, as long as expenditure does not proportionately increase.
What kind of businesses would most likely get a balance transfer credit card?
Startups
The importance of good cash flow management cannot be over-emphasised for a startup. The ability to manage multiple expenses and still remain liquid may take a while to master. However, a balance transfer business credit card can be a useful tool to help you manage existing debts without the burden of high interest.
Small businesses
A small business may find itself struggling to regulate cash flow for any number of reasons. Whether it be due to seasonal sales fluctuations, unexpected or emergency expenses, delayed receivables or even growth, a balance transfer credit card can help stabilise finances.
What to look at when comparing balance transfer credit cards
Keeping the following factors in mind can help you find a balance transfer option that suits your business needs.
- Business balance transfer options. It's less common for business credit cards to advertise balance transfer offers. So, check the card details to see if a balance transfer is available, or call the provider to ask them. Alternatively, you may want to consider a personal balance transfer credit card or look at consolidating your debt with a business loan.
- Length of offer. The length of a balance transfer promotion determines how long you will enjoy interest savings on your debt. Naturally, all else being equal, the longer the period the better. The benefits of a long balance transfer offer period might however be offset by a high purchase interest rate, which should then be factored into your comparison.
- Promotional interest rate and revert rate. Most balance transfer credit cards offer a 0% promotional period, but some may offer a reduced interest rate rather than no interest. As well as the promotional period, you should also consider the revert rate that will apply to any remaining debts at the end of the introductory period. This is especially important if you don’t think you can repay your debt before the 0% offer ends, as it could present a risk of falling back into unmanageable territory as your balance collects interest again.
- Balance transfer fee. Some cards charge a balance transfer fee of 2–3% of the amount you’re transferring when you move your debt to the new card. Be sure to factor in this fee when comparing your cards to ensure it doesn’t outweigh the value of your interest savings. Use finder’s balance transfer calculator at the top of the table to get an idea of how much you can save.
- Other card fees. Also consider and compare other card fees including annual fees, late fees, international transaction fees and cash advance fees where applicable. If any of these outweigh the interest savings you’ll make from the 0% period, you should consider another card.
- How much you can balance transfer. The card may have a maximum balance transfer limit of a percentage of your credit limit. For example, you may only be able to transfer up to 90% of your approved credit limit. Make sure this limit is high enough to transfer your entire debt, otherwise any remaining amount will continue to collect interest in your existing account.
- Eligibility. Just as business credit cards have different eligibility requirements to personal cards (like needing an ABN to apply), the balance transfer application may also be different. For example, you may only be able to balance transfer debt from Australian credit cards held in your name (or your business's name) with a different provider.
A business credit card can be a helpful tool for managing your spending, but make sure you look at all the costs and features. And if you can't find a business credit card with a balance transfer offer that you want, you could also look at other loans and personal balance transfer credit cards (depending on the size of your business).
Compare 0% balance transfer credit cards
Pictures: Shutterstock
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