Every business reaches a point where it could use a boost in cash flow. In this position, many business owners turn to credit cards. One of the biggest advantages of having a credit card is the payment flexibility this option offers. They can also indicate a higher level of benefits.
However, some credit cards are more “affordable” than others. This financing solution typically comes with interest, issuance and maintenance fees. Some of the most expensive credit card fees simply come from running a balance on the card. The key to using them is to be proactive in managing their use.
Here are a few ways you can avoid or manage these costs.
Calculate the annual fee
As it sounds, an annual fee is a fee that is paid annually for the ability to carry a credit card. And this is one fee that might actually be worth the cost. This fee is typical for travel credit cards, for example, which tend to offer richer rewards than cash-back cards. To really determine if this cost is worth it for your unique situation, calculate what you anticipate your spending to look like in the near future. Based on that, would you earn enough rewards each year to outweigh the annual fee?
Consider the balance transfer fee
If you’re unfamiliar with a balance transfer fee, this fee is incurred when you move debt from one credit card to another. Typically, this fee falls anywhere within 3% to 5% of the amount transferred. While many cards offer 0% interest on balance transfers for the first year, it is important that you dive a little further into the details and see whether the interest savings really make up for the transfer fee.
Analyze the cash advance fee
Any time you borrow cash against your credit card, you pay a cash advance fee. This fee typically falls somewhere between 2% to 5% of the amount borrowed. While that may not sound like a lot at first glance, this cash advance can add up to be significant when all is said and done. Some purchases may involve higher interest rates than others and ATM fees may apply, for example. If you’re in an emergency, there are more affordable options available.
Understand the late payment and over-limit fees
Late payment and over-limit fees often come as a bit of a shock. A late payment fee is charged when you don’t make at least the minimum payment by the due date, and an over-limit fee is charged when your card’s balance exceeds your credit limit. Some ways you can avoid this are to enroll in auto-pay to avoid missing due dates and then meticulously check your account to ensure you stay well under your credit limit.
Thoroughly research all your options
All in all, make sure you research all of your options. While credit cards work well for some, they don’t work as well for others. Before you commit and entangle your business in unnecessary fees, make sure you also check out other options, like merchant cash advance from a provider that specializes in your business type and industry. These providers also offer other valuable tools like electronic check. Ultimately, the option you choose should provide the flexibility you need, without putting your business’ long-term health in danger with fees and hidden costs.
Blair Thomas has been a music producer, bouncer, screenwriter and for over a decade has been the proud Co-Founder of eMerchantBroker, the highest rated high risk merchant account processor in the country. He has climbed in the Himalayas, survived a hurricane, and lived on a gold mine in the Yukon. He currently calls Thailand his home with a lifetime collection of his favorite books.