Tag: Might

Business Credit Card Rates: Everything You Might Need to Pay

Find Out What Hidden Business Credit Card Rates to Look For and How to Avoid Them

Credit cards are a fact of life for most small businesses.  They get a bad rap, but used properly they can be hugely beneficial.  It is a precarious walk on a balance beam, however, to balance the benefits versus the cost.  When you think of business credit card rates, the first thing that comes to mind is probably interest rates.  These are, of course, one of the largest costs of credit cards.  They are also widely variable, ranging from as low as 0% for an introductory rate to almost 30% in some cases.

There are many more costs that can be associated with these cards however.  So many in fact, that many business owners do not even realize the business credit card rates they are paying.  It can be frustrating to continually make payments yet never see a corresponding decrease in the balance.  We dug in to find out everything you need to know about the business credit card rates you know, those you don’t know, and how to handle or avoid each one.

Business Credit Card Rates: The Devil You Know

Here are some common business credit card rates you are probably familiar with, and some tips on how to save on each.

Check out our professional research and score the best business credit cards for your business.

Interest

This is a given with any credit card, and most likely the number one cost most associate with them. The only way to avoid it is to pay off the entire balance every month.  Short of that, it cannot be eliminated.  It can be reduced however.

First, keep your personal and business credit score strong.  The better the score, the lower the interest rate options available to you.  Then, shop around. Just look for the cards with the best rates.  Be aware however, many lower rates are promotional only, so they will go up after a set period of time.

Annual Fees

When it comes to business credit card rates, this one is no secret either.  Many cards charge an annual fee for the administration of the account. Most often they are associated with cards that earn rewards such as miles or points that can be converted to gift cards, airline miles, or cash back.  The key to keeping annual fee costs to a minimum is to simply use cards that do not charge this fee.

If, however, you find a card with a fee that has rewards that you will use to the point that you recover the cost of the fee plus some, then the benefit may outweigh that cost.  There could be other benefits associated with a card that charges a fee as well.  A cost-benefit analysis based on your specific business situation is the only way to know if it is worth it.

Late Fees

This one is self-explanatory. Late fees are charged to your card when you pay after the due date.  The best way to avoid them is to not pay late.  However, know that if you do pay late and it is a first offense, you may be able to have that fee removed.  You have to call and ask.  It doesn’t always work, but sometimes it does for a first offender.

Hidden Business Credit Card Rates

Now for the part you are really wondering about.  What are you paying that you do not realize?  How much could you save if you knew about these things and either avoided them or chose cards that did not charge them?  Here are the hidden costs to look for, and how to reduce or avoid them all together.

Balance Transfer Fees

These are fees on balances that you transfer from another card.  Typically this would be done in an effort to get a lower, promotional interest rate on the balance transfer.  Usually the fee is a percentage of the amount being transferred with some minimum.  So if, for example, you were to transfer $3,000 and the transfer fee was 3%, your balance on the new card would increase by $3,090.

The only way to avoid this is to not do a balance transfer.  Of course, there could be cases where the savings with the promotional rate makes it worth the fee.  That will have to be determined on an individual basis.

Cash Advance Fees

These are just as they sound, fees paid on cash advance funds.  Similar to balance transfer fees, they are typically a percentage of the advance.  Cash advances can come in the form of cash advance checks that you simply write and deposit into your account, or funds that you get from an ATM with your credit card and a cash advance PIN.  If you do not do cash advances with your credit card, you do not have to worry about this fee.

Reward Redemption Fees

Did you know that sometimes you have to pay a fee on rewards that you earn?  The credit card companies say that this is to pay for the processing of the rewards.  Avoid these fees by reading the fine print in the rewards section before you apply for the card.  Most do not even know that these fees exist, and sometimes they end up costing more than the rewards are even worth.

Reward Recovery Fees

This fee is closely related to late fees.  Some cards revoke rewards earned during the month if you are late on your payment for that month.  They then charge a fee to reinstate those rewards.  To avoid this fee, be sure to pay on time.

Inactivity fees and Account Closure Fees

The inactivity fee is assessed after you go a certain length of time without any activity on the card. Most often that amount of time is one year.  The first thing you have to do to avoid this fee is know which cards have if. After you determine that, figure out the minimum you must spend in a year to avoid the fee.  Then, either make certain you spend that amount, or cancel the card.

Beware however, because some cards do charge a fee for closing accounts.

Payment Protection

Most cards offer a payment protection plan.  This is basically insurance that will cover your payments in the event you become ill or unemployed.  While is sounds great, it can be quite expensive and add up quickly. Avoid it by either opting out on the front end, or canceling it if you already have it and do not want to pay it.

Paper Statement

The push to save the environment is a noble one, and the credit card companies are doing their part.  One way they are doing this is by charging a fee for paper statements.  You can opt in for electronic statements and avoid paying the fee.

Foreign Transactions

Did you know that if you use your credit card to pay for goods from a company that is not located in the United States, you may have to pay a fee for that transaction?  This is true even if you never leave the country, and even if you do not know the other company is foreign.  Read the fine print about fees before making any purchases from companies you are not familiar with to determine if this will be an issue.

Taxes on Rewards

While this isn’t exactly a credit card fee, it is a potential hidden cost of using credit cards.  There are times when, depending on how rewards are earned and how they are used, that you may have to pay taxes on them.  Find out more about this and how to avoid it here.

Check out our professional research and score the best business credit cards for your business.

Here’s the big key to avoiding unexpected fees and costs.  Know what to look for.  Now that you have a list of the most common hidden credit card costs, you can be diligent to pay close attention on the front end and not apply for any credit cards that charge fees you do not want to pay.

No one wants to pay more than they have to.  On the other hand, some of these fees may be worth it to you to pay depending on the benefit associated with it and whether or not your specific business could benefit.  For example, if you have a chronic health issue, it may be worth it to you to pay for the payment protection plan.

Why Business Credit Card Rates May Be Worth It: Benefits of Business Credit Cards

While all these costs can make it seem that credit cards are the devil, and though they do get a bad rap, there are actually plenty of benefits to using business credit cards. Here are just a few:

  • Build business credit
  • Finance business needs without the hassle of a loan, including:
    • Taking advantage of special bulk pricing
    • Equipment maintenance and repair
    • Working capital
    • Unexpected, or expected, cash gaps
  • Use rewards to reduce costs

Of course, we all know credit can get out of hand, but used properly and with the proper attention to business credit card rates, they can be an amazing tool for your business.

How Can They Help Build Business Credit?

Not only can these cards help you build business credit, they are actually vital to the process.  Of course, regardless of the business credit card rates, you will have to have business credit to get business credit.  That is why you start with vendors in the vendor credit tier first.  These vendors will give you net 30 terms on invoices and report those payments to the credit reporting agencies, without a credit check.  After you have enough of these accounts reporting, you will have enough business credit to apply for your first business credit cards.

You’ll start with store cards.  Cards tied to retail stores such as Best Buy, Office Depot, and Lowes will approve accounts with very new business credit earned from accounts in the vendor credit tier.  They will also report payments to the credit agencies, which will further grow your score

After enough of these are reporting, you can apply for cards in the fleet credit tier and the cash credit tier.  As these cards report your on-time payments, your score will only grow stronger.  This will also mean you start getting offers from cards with more favorable business credit card rates, such as lower interest. Find out more about the credit tiers and building business credit using credit cards in each one here.

Side Note: Hidden Business Credit Card Rates When Accepting Credit Cards

Just as there are hidden fees when it comes to using credit cards in the course of your business, there are also hidden rates on the other side.  If you accept cards as payment in the course of your business, be aware of these little-known costs.

Manual entry fee

Did you know that it costs your business more in credit card processing fees if you manually enter the credit card number rather than swiping it?  It’s because of the increased security risk.  If at all possible, make sure customers swipe instead of type in the number.

Check out our professional research and score the best business credit cards for your business.

Below Limit Costs

Okay so this isn’t an “extra” fee per se, but it is a definite cost.  It is entirely possible that you can lose money on a credit card sale if it doesn’t hit a certain dollar amount.  This is because the business credit card rate on processing that transaction may actually be more than the profit earned from it.

That’s why you see many businesses, such as donut shops and other businesses with frequent low dollar amount purchases, require a minimum purchase if you intend to use a card.  This not only avoids the problem of losing money on low dollar amount purchases due to processing fees, but it can increase profits when you consider the number of people that do not carry cash.

Stop Paying Business Credit Card Rates You Do Not Know About

It is impossible to find a card with no unsavory fees.  The key is to determine which ones are worth it to you to pay.  Then, apply only for cards that charge business credit card rates you are willing to pay.  The credit card industry is fiercely competitive, and if your business credit score is solid, you can have your pick of the cards that will work best for you.

The post Business Credit Card Rates: Everything You Might Need to Pay appeared first on Credit Suite.

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Do You Owe Tax on Business Credit Card Rewards? The Answer Might Surprise You

And 3 Surprising Things Other than Tax on Business Credit Card Rewards that May Impact Your Taxes

When choosing a credit card, whether personal or business, there are several factors to compare.  Interest rate is probably the one most consumers consider first, followed closely by credit limit, and then rewards.  Throw an annual fee in the mix, and you have even more to ponder.  Back to the rewards thing though.  Who doesn’t love a good reward? Cash back, points, airline miles galore, these are often the things that make the choice between one card or the other most interesting.  When it comes to rewards however, one thing most do not consider is that they may have to pay a tax on business credit card rewards.

When Do You Have to Pay Tax on Business Credit Card Rewards?

Whether or not you pay tax on credit card rewards on your business credit cards will depend.  Depends on what you ask?  It depends on whether you had to spend money to get those rewards.  For example, if you earn cash back, that would be a discount rather than income. It is therefore not taxable.  The same is true if you earn points or travel miles as a percentage of the money you spend.  If you earn $1 cash back for every $5 spent, that is considered a $1 discount, not $1 of income, and therefore not taxable.

If, however, all you had to do was open the account to earn the reward, and you did not have to spend anything to get it, then you may have to report it as income.  This is the case with the bonuses that many credit card companies are fond of offering for opening an account with them.  They may come in the form of cash, points, or miles.  It doesn’t matter what form they take.  If you didn’t have to do anything to get them, they are likely going to be taxable.

If your credit card information specifically states the funds are taxable, or if you receive a form 1099 from your credit card company, you can be sure there will be a tax impact. However, the absence of these two things does not set you free. A company only needs to to send a form 1099 if the amount is $600 or greater.  Amounts under $600 are still taxable, but companies only have to send a form 1099 if the amount is over $600.

Check out our professional research and score the best business credit cards for your business.

Real Life Example of Tax on Business Credit Card Rewards

In 2012, some Citibank card holders received frequent flyer miles as a gift for opening their accounts.  At tax time, a 1099-Misc came in the mail. It indicated the miles had been reported to the IRS as income with a value of 2.5 cents per mile. As you can imagine, this was an unwelcome shock to most.  Since they did not have to spend anything to receive the miles, the reward was taxable income.

Special Considerations for Tax on Business Credit Card Rewards

When it comes to tax on rewards from business credit cards, there are some special considerations that can affect the tax impact of the rewards.

Using Rewards to Offset Business Expenses

If you are using business credit card rewards to reduce the cost of business purchases, that affects the amount of a business expense that is tax deductible.

For example, if you purchase a new printer for your business for $300, and you offset the cost with rewards equal to $100, you can only deduct $200 as a business expense.  In this way, business credit card rewards can still increase your taxable income, though they are not technically taxable as income directly.

tax on business credit card rewards Credit Suite2

 

Using Business Credit Card Rewards to Offset Personal Expenses

If you happen to use rewards earned on business credit cards for personal expenses, rather than business expenses, you will not have to worry about them reducing business expense and thus indirectly affecting your tax liability.  The question has come up about whether rewards earned on business cards and used for personal purposes should be personal taxable income.  The IRS has said no.  They will not consider this to be taxable income.  As a result, there is zero impact on your taxes from these rewards.

Charitable Donations

If you receive a $500 bonus for opening an account, that is taxable income because no spending took place to get those funds.  If, however, you have the option to donate that amount to a charity, you do not have to report that $500 as income. And it is also tax deductible as a charitable contribution.  It’s a win/win.

Recap: How Do You Avoid Tax on Business Credit Card Rewards?

What’s the takeaway?  To best use your business credit card rewards with minimum tax impact, do the following:

  • Donate any bonuses, such as rewards not attached to required spending, to charity.
  • Use rewards such as cash back, points, or miles for personal expenses rather than to reduce business expense.

How Do I Find the Best Business Credit Cards for My Business?

There are a ton of options when it comes to choosing a business credit card, and which one is the best for your business will depend on many factors.  The first, as mentioned earlier, should probably be interest rate.  You want the interest rate to be as low as possible.

Next, consider the credit limit.  Does it give you access to enough funds to handle what you need it to?  If you are going to consistently have balances at or near your credit limit, that’s no good. It will lower your debt-to-credit ratio, which directly impacts your credit score in a negative manner.

The next thing to look at is rewards.  You need to find the card with the rewards that will be the most useful to you.  A great travel rewards program is only great if you travel a lot.  Triple points earned at gas stations and restaurants sounds good, but it is only a good deal if you spend a lot of money at gas stations and restaurants. If most of your credit cards spending is on supplies or inventory, these rewards will not be useful to your business.

Check out our professional research and score the best business credit cards for your business.

Next, balance the cost of the rewards versus how much you will actually benefit from them.  For example, you may have a card with rewards that are good for you.  But if it has a high annual fee, determine if the rewards benefit actually makes up for the cost of the annual fee. Do you pay $100 fee each year?  Then be sure to earn more than $100 worth of useable rewards with that card annually.

How To Get Business Credit Cards

Of course, the business credit card discussion is moot if you don’t even have one.  Perhaps you have tried, but you can’t get approval. Here’s the key.  You need to have strong business credit to get the best business credit cards.  This is credit that is separate from your personal credit, and therefore the accounts on your business credit report do not affect your personal credit score.

Business credit doesn’t just happen on its own however, and most new businesses do not realize this.  In fact, many new small business owners are not aware that business credit is even a thing, and consequently they have no clue how to set up their business properly to allow them to build business credit.

How Do You Set Up a Business to Build Business Credit?

Before you can worry about tax on business credit card rewards, you have to have business credit cards.  Before you can get business credit cards, you need business credit.  To get business credit, you have to set up your business to be a separate entity from yourself.

The first step in this process is to incorporate.  It is easy for a new business owner to simply operate as a sole proprietorship or a partnership, but this ties up all your personal credit data with your business information.  By incorporating, you are taking the first step in separating your business from your personal credit.

Next, apply for an EIN.  You can do this for free at IRS.gov.  It is a number that functions as an identifier for your business the same way your SSN is a personal identifier.  You will use this number on business credit card applications instead of your SSN.

Then, you will need to get a DUNS number.  This is a unique identifying number that you get from Dun & Bradstreet.  Since D&B is the largest and most commonly used business credit reporting agency, this number is essential to building business credit.  Get it for free on the Dun & Bradstreet website, but don’t let them fool you.  They will try to sell you a bunch of stuff you don’t need.  You really only need the number, and it is free.

Other Things that Will Make Your Business Appear Fundable On its Own to Lenders

What else does your business need to appear as a fundable entity separate from you personally?

  • A phone number and address that is different from your personal phone number and address. The phone number should be through a toll -free exchange and listed in the directories along with the business name and address.
  • A business bank account that all business transactions run through. Not only does this help separate your business as its own entity, but it also makes it easier to separate business expenses come tax time. In addition, some lenders actually make a business bank account a requirement for approval.
  • A professional website and dedicated email address. The email address should have the same URL as the website, and the web address should be something professional and paid for. A free email or website service is not suitable for these purposes.

Surprise! Here Are 3 Other Things that are Taxable that May Not Know

Now you know whether or not your credit cards rewards are taxable, how to avoid tax impact from business credit card rewards as much as possible, and how to get the best business credit cards for your business.  How about a few fun facts?  Here are 3 things that are taxable that you probably did not realize.

Bitcoin

Yes, if your bitcoin is currently worth more than you paid for it, the gains are taxable just like with stocks and bonds.  This also rings true of Bitcoin you get from your employer as compensation, a bonus, incentive, or even as a gift.

Gifts from an Employer

Speaking of gifts from employers, they are usually taxable.  This includes more than cash bonuses.  Did your boss give you an awesome new set of golf clubs or a weekend in his beach condo?  That may be taxable too.

Check out our professional research and score the best business credit cards for your business.

Bartering

This one was a total shock to me.  One of my favorite small business budget hacks is to barter within my network for goods and services.  It is not uncommon for small business owners to trade off for any number of things.  Graphics, social media management, content writing, cleaning services, printing services, and more.  The cash value of those trades can actually be taxable.  Who  ?

Do You Owe Tax on Business Credit Card Rewards?  Maybe, Maybe Not

It all depends on how you got those rewards and what you do with them. Most credit card rewards are actually a discount, because they are directly related to some level of spending.  These are not taxable, but they can still increase your taxable income by decreasing your business expense deduction if you choose to use them to reduce your business expenses. But if you choose to use those rewards to reduce personal expenses, they have no tax impact at all.

Bonuses for opening an account are different.  They are taxable as income, even if they do not reach the $600 threshold to trigger a form 1099.  This changes if you get the option to donate these funds to charity and choose to do so.  Not only are they then not taxable, but they also count as a tax deduction.

The best option to avoid tax on business credit card rewards is to choose the card with the rewards that will best benefit you personally.   Then you can redeem rewards for personal use. For bonuses, just donate them to charity if given the option.  It looks good for your business, and it will only help you come tax time.

Always be careful to weigh the tax benefit of not using rewards for business expense against the actual benefit of the cost reduction however.  You may find reduced expenses to be worth the cost come tax time.

The post Do You Owe Tax on Business Credit Card Rewards? The Answer Might Surprise You appeared first on Credit Suite.

Business Credit Card Rates: Everything You Might Need to Pay

Find Out What Hidden Business Credit Card Rates to Look For and How to Avoid Them

Credit cards are a fact of life for most small businesses.  They get a bad rap, but used properly they can be hugely beneficial.  It is a precarious walk on a balance beam, however, to balance the benefits versus the cost.  When you think of business credit card rates, the first thing that comes to mind is probably interest rates.  These are, of course, one of the largest costs of credit cards.  They are also widely variable, ranging from as low as 0% for an introductory rate to almost 30% in some cases.

There are many more costs that can be associated with these cards however.  So many in fact, that many business owners do not even realize the business credit card rates they are paying.  It can be frustrating to continually make payments yet never see a corresponding decrease in the balance.  We dug in to find out everything you need to know about the business credit card rates you know, those you don’t know, and how to handle or avoid each one.

Business Credit Card Rates: The Devil You Know

Here are some common business credit card rates you are probably familiar with, and some tips on how to save on each.

Check out our professional research and score the best business credit cards for your business.

Interest

This is a given with any credit card, and most likely the number one cost most associate with them. The only way to avoid it is to pay off the entire balance every month.  Short of that, it cannot be eliminated.  It can be reduced however.

First, keep your personal and business credit score strong.  The better the score, the lower the interest rate options available to you.  Then, shop around. Just look for the cards with the best rates.  Be aware however, many lower rates are promotional only, so they will go up after a set period of time.

Annual Fees

When it comes to business credit card rates, this one is no secret either.  Many cards charge an annual fee for the administration of the account. Most often they are associated with cards that earn rewards such as miles or points that can be converted to gift cards, airline miles, or cash back.  The key to keeping annual fee costs to a minimum is to simply use cards that do not charge this fee.

If, however, you find a card with a fee that has rewards that you will use to the point that you recover the cost of the fee plus some, then the benefit may outweigh that cost.  There could be other benefits associated with a card that charges a fee as well.  A cost-benefit analysis based on your specific business situation is the only way to know if it is worth it.

Late Fees

This one is self-explanatory. Late fees are charged to your card when you pay after the due date.  The best way to avoid them is to not pay late.  However, know that if you do pay late and it is a first offense, you may be able to have that fee removed.  You have to call and ask.  It doesn’t always work, but sometimes it does for a first offender.

Hidden Business Credit Card Rates

Now for the part you are really wondering about.  What are you paying that you do not realize?  How much could you save if you knew about these things and either avoided them or chose cards that did not charge them?  Here are the hidden costs to look for, and how to reduce or avoid them all together.

Balance Transfer Fees

These are fees on balances that you transfer from another card.  Typically this would be done in an effort to get a lower, promotional interest rate on the balance transfer.  Usually the fee is a percentage of the amount being transferred with some minimum.  So if, for example, you were to transfer $3,000 and the transfer fee was 3%, your balance on the new card would increase by $3,090.

The only way to avoid this is to not do a balance transfer.  Of course, there could be cases where the savings with the promotional rate makes it worth the fee.  That will have to be determined on an individual basis.

Cash Advance Fees

These are just as they sound, fees paid on cash advance funds.  Similar to balance transfer fees, they are typically a percentage of the advance.  Cash advances can come in the form of cash advance checks that you simply write and deposit into your account, or funds that you get from an ATM with your credit card and a cash advance PIN.  If you do not do cash advances with your credit card, you do not have to worry about this fee.

Reward Redemption Fees

Did you know that sometimes you have to pay a fee on rewards that you earn?  The credit card companies say that this is to pay for the processing of the rewards.  Avoid these fees by reading the fine print in the rewards section before you apply for the card.  Most do not even know that these fees exist, and sometimes they end up costing more than the rewards are even worth.

Reward Recovery Fees

This fee is closely related to late fees.  Some cards revoke rewards earned during the month if you are late on your payment for that month.  They then charge a fee to reinstate those rewards.  To avoid this fee, be sure to pay on time.

business credit card rates Credit Suite2

Inactivity fees and Account Closure Fees

The inactivity fee is assessed after you go a certain length of time without any activity on the card. Most often that amount of time is one year.  The first thing you have to do to avoid this fee is know which cards have if. After you determine that, figure out the minimum you must spend in a year to avoid the fee.  Then, either make certain you spend that amount, or cancel the card.

Beware however, because some cards do charge a fee for closing accounts.

Payment Protection

Most cards offer a payment protection plan.  This is basically insurance that will cover your payments in the event you become ill or unemployed.  While is sounds great, it can be quite expensive and add up quickly. Avoid it by either opting out on the front end, or canceling it if you already have it and do not want to pay it.

Paper Statement

The push to save the environment is a noble one, and the credit card companies are doing their part.  One way they are doing this is by charging a fee for paper statements.  You can opt in for electronic statements and avoid paying the fee.

Foreign Transactions

Did you know that if you use your credit card to pay for goods from a company that is not located in the United States, you may have to pay a fee for that transaction?  This is true even if you never leave the country, and even if you do not know the other company is foreign.  Read the fine print about fees before making any purchases from companies you are not familiar with to determine if this will be an issue.

Taxes on Rewards

While this isn’t exactly a credit card fee, it is a potential hidden cost of using credit cards.  There are times when, depending on how rewards are earned and how they are used, that you may have to pay taxes on them.  Find out more about this and how to avoid it here.

Check out our professional research and score the best business credit cards for your business.

Here’s the big key to avoiding unexpected fees and costs.  Know what to look for.  Now that you have a list of the most common hidden credit card costs, you can be diligent to pay close attention on the front end and not apply for any credit cards that charge fees you do not want to pay.

No one wants to pay more than they have to.  On the other hand, some of these fees may be worth it to you to pay depending on the benefit associated with it and whether or not your specific business could benefit.  For example, if you have a chronic health issue, it may be worth it to you to pay for the payment protection plan.

Why Business Credit Card Rates May Be Worth It: Benefits of Business Credit Cards

While all these costs can make it seem that credit cards are the devil, and though they do get a bad rap, there are actually plenty of benefits to using business credit cards. Here are just a few:

  • Build business credit
  • Finance business needs without the hassle of a loan, including:
    • Taking advantage of special bulk pricing
    • Equipment maintenance and repair
    • Working capital
    • Unexpected, or expected, cash gaps
  • Use rewards to reduce costs

Of course, we all know credit can get out of hand, but used properly and with the proper attention to business credit card rates, they can be an amazing tool for your business.

How Can They Help Build Business Credit?

Not only can these cards help you build business credit, they are actually vital to the process.  Of course, regardless of the business credit card rates, you will have to have business credit to get business credit.  That is why you start with vendors in the vendor credit tier first.  These vendors will give you net 30 terms on invoices and report those payments to the credit reporting agencies, without a credit check.  After you have enough of these accounts reporting, you will have enough business credit to apply for your first business credit cards.

You’ll start with store cards.  Cards tied to retail stores such as Best Buy, Office Depot, and Lowes will approve accounts with very new business credit earned from accounts in the vendor credit tier.  They will also report payments to the credit agencies, which will further grow your score

After enough of these are reporting, you can apply for cards in the fleet credit tier and the cash credit tier.  As these cards report your on-time payments, your score will only grow stronger.  This will also mean you start getting offers from cards with more favorable business credit card rates, such as lower interest. Find out more about the credit tiers and building business credit using credit cards in each one here.

Side Note: Hidden Business Credit Card Rates When Accepting Credit Cards

Just as there are hidden fees when it comes to using credit cards in the course of your business, there are also hidden rates on the other side.  If you accept cards as payment in the course of your business, be aware of these little-known costs.

Manual entry fee

Did you know that it costs your business more in credit card processing fees if you manually enter the credit card number rather than swiping it?  It’s because of the increased security risk.  If at all possible, make sure customers swipe instead of type in the number.

Check out our professional research and score the best business credit cards for your business.

Below Limit Costs

Okay so this isn’t an “extra” fee per se, but it is a definite cost.  It is entirely possible that you can lose money on a credit card sale if it doesn’t hit a certain dollar amount.  This is because the business credit card rate on processing that transaction may actually be more than the profit earned from it.

That’s why you see many businesses, such as donut shops and other businesses with frequent low dollar amount purchases, require a minimum purchase if you intend to use a card.  This not only avoids the problem of losing money on low dollar amount purchases due to processing fees, but it can increase profits when you consider the number of people that do not carry cash.

Stop Paying Business Credit Card Rates You Do Not Know About

It is impossible to find a card with no unsavory fees.  The key is to determine which ones are worth it to you to pay.  Then, apply only for cards that charge business credit card rates you are willing to pay.  The credit card industry is fiercely competitive, and if your business credit score is solid, you can have your pick of the cards that will work best for you.

The post Business Credit Card Rates: Everything You Might Need to Pay appeared first on Credit Suite.

Business Credit Card Rates: Everything You Might Need to Pay

Find Out What Hidden Business Credit Card Rates to Look For and How to Avoid Them

Credit cards are a fact of life for most small businesses.  They get a bad rap, but used properly they can be hugely beneficial.  It is a precarious walk on a balance beam, however, to balance the benefits versus the cost.  When you think of business credit card rates, the first thing that comes to mind is probably interest rates.  These are, of course, one of the largest costs of credit cards.  They are also widely variable, ranging from as low as 0% for an introductory rate to almost 30% in some cases.

There are many more costs that can be associated with these cards however.  So many in fact, that many business owners do not even realize the business credit card rates they are paying.  It can be frustrating to continually make payments yet never see a corresponding decrease in the balance.  We dug in to find out everything you need to know about the business credit card rates you know, those you don’t know, and how to handle or avoid each one.

Business Credit Card Rates: The Devil You Know

Here are some common business credit card rates you are probably familiar with, and some tips on how to save on each.

Check out our professional research and score the best business credit cards for your business.

Interest

This is a given with any credit card, and most likely the number one cost most associate with them. The only way to avoid it is to pay off the entire balance every month.  Short of that, it cannot be eliminated.  It can be reduced however.

First, keep your personal and business credit score strong.  The better the score, the lower the interest rate options available to you.  Then, shop around. Just look for the cards with the best rates.  Be aware however, many lower rates are promotional only, so they will go up after a set period of time.

Annual Fees

When it comes to business credit card rates, this one is no secret either.  Many cards charge an annual fee for the administration of the account. Most often they are associated with cards that earn rewards such as miles or points that can be converted to gift cards, airline miles, or cash back.  The key to keeping annual fee costs to a minimum is to simply use cards that do not charge this fee.

If, however, you find a card with a fee that has rewards that you will use to the point that you recover the cost of the fee plus some, then the benefit may outweigh that cost.  There could be other benefits associated with a card that charges a fee as well.  A cost-benefit analysis based on your specific business situation is the only way to know if it is worth it.

Late Fees

This one is self-explanatory. Late fees are charged to your card when you pay after the due date.  The best way to avoid them is to not pay late.  However, know that if you do pay late and it is a first offense, you may be able to have that fee removed.  You have to call and ask.  It doesn’t always work, but sometimes it does for a first offender.

Hidden Business Credit Card Rates

Now for the part you are really wondering about.  What are you paying that you do not realize?  How much could you save if you knew about these things and either avoided them or chose cards that did not charge them?  Here are the hidden costs to look for, and how to reduce or avoid them all together.

Balance Transfer Fees

These are fees on balances that you transfer from another card.  Typically this would be done in an effort to get a lower, promotional interest rate on the balance transfer.  Usually the fee is a percentage of the amount being transferred with some minimum.  So if, for example, you were to transfer $3,000 and the transfer fee was 3%, your balance on the new card would increase by $3,090.

The only way to avoid this is to not do a balance transfer.  Of course, there could be cases where the savings with the promotional rate makes it worth the fee.  That will have to be determined on an individual basis.

Cash Advance Fees

These are just as they sound, fees paid on cash advance funds.  Similar to balance transfer fees, they are typically a percentage of the advance.  Cash advances can come in the form of cash advance checks that you simply write and deposit into your account, or funds that you get from an ATM with your credit card and a cash advance PIN.  If you do not do cash advances with your credit card, you do not have to worry about this fee.

Reward Redemption Fees

Did you know that sometimes you have to pay a fee on rewards that you earn?  The credit card companies say that this is to pay for the processing of the rewards.  Avoid these fees by reading the fine print in the rewards section before you apply for the card.  Most do not even know that these fees exist, and sometimes they end up costing more than the rewards are even worth.

Reward Recovery Fees

This fee is closely related to late fees.  Some cards revoke rewards earned during the month if you are late on your payment for that month.  They then charge a fee to reinstate those rewards.  To avoid this fee, be sure to pay on time.

Inactivity fees and Account Closure Fees

The inactivity fee is assessed after you go a certain length of time without any activity on the card. Most often that amount of time is one year.  The first thing you have to do to avoid this fee is know which cards have if. After you determine that, figure out the minimum you must spend in a year to avoid the fee.  Then, either make certain you spend that amount, or cancel the card.

Beware however, because some cards do charge a fee for closing accounts.

Payment Protection

Most cards offer a payment protection plan.  This is basically insurance that will cover your payments in the event you become ill or unemployed.  While is sounds great, it can be quite expensive and add up quickly. Avoid it by either opting out on the front end, or canceling it if you already have it and do not want to pay it.

Paper Statement

The push to save the environment is a noble one, and the credit card companies are doing their part.  One way they are doing this is by charging a fee for paper statements.  You can opt in for electronic statements and avoid paying the fee.

Foreign Transactions

Did you know that if you use your credit card to pay for goods from a company that is not located in the United States, you may have to pay a fee for that transaction?  This is true even if you never leave the country, and even if you do not know the other company is foreign.  Read the fine print about fees before making any purchases from companies you are not familiar with to determine if this will be an issue.

Taxes on Rewards

While this isn’t exactly a credit card fee, it is a potential hidden cost of using credit cards.  There are times when, depending on how rewards are earned and how they are used, that you may have to pay taxes on them.  Find out more about this and how to avoid it here.

Check out our professional research and score the best business credit cards for your business.

Here’s the big key to avoiding unexpected fees and costs.  Know what to look for.  Now that you have a list of the most common hidden credit card costs, you can be diligent to pay close attention on the front end and not apply for any credit cards that charge fees you do not want to pay.

No one wants to pay more than they have to.  On the other hand, some of these fees may be worth it to you to pay depending on the benefit associated with it and whether or not your specific business could benefit.  For example, if you have a chronic health issue, it may be worth it to you to pay for the payment protection plan.

Why Business Credit Card Rates May Be Worth It: Benefits of Business Credit Cards

While all these costs can make it seem that credit cards are the devil, and though they do get a bad rap, there are actually plenty of benefits to using business credit cards. Here are just a few:

  • Build business credit
  • Finance business needs without the hassle of a loan, including:
    • Taking advantage of special bulk pricing
    • Equipment maintenance and repair
    • Working capital
    • Unexpected, or expected, cash gaps
  • Use rewards to reduce costs

Of course, we all know credit can get out of hand, but used properly and with the proper attention to business credit card rates, they can be an amazing tool for your business.

How Can They Help Build Business Credit?

Not only can these cards help you build business credit, they are actually vital to the process.  Of course, regardless of the business credit card rates, you will have to have business credit to get business credit.  That is why you start with vendors in the vendor credit tier first.  These vendors will give you net 30 terms on invoices and report those payments to the credit reporting agencies, without a credit check.  After you have enough of these accounts reporting, you will have enough business credit to apply for your first business credit cards.

You’ll start with store cards.  Cards tied to retail stores such as Best Buy, Office Depot, and Lowes will approve accounts with very new business credit earned from accounts in the vendor credit tier.  They will also report payments to the credit agencies, which will further grow your score

After enough of these are reporting, you can apply for cards in the fleet credit tier and the cash credit tier.  As these cards report your on-time payments, your score will only grow stronger.  This will also mean you start getting offers from cards with more favorable business credit card rates, such as lower interest. Find out more about the credit tiers and building business credit using credit cards in each one here.

Side Note: Hidden Business Credit Card Rates When Accepting Credit Cards

Just as there are hidden fees when it comes to using credit cards in the course of your business, there are also hidden rates on the other side.  If you accept cards as payment in the course of your business, be aware of these little-known costs.

Manual entry fee

Did you know that it costs your business more in credit card processing fees if you manually enter the credit card number rather than swiping it?  It’s because of the increased security risk.  If at all possible, make sure customers swipe instead of type in the number.

Check out our professional research and score the best business credit cards for your business.

Below Limit Costs

Okay so this isn’t an “extra” fee per se, but it is a definite cost.  It is entirely possible that you can lose money on a credit card sale if it doesn’t hit a certain dollar amount.  This is because the business credit card rate on processing that transaction may actually be more than the profit earned from it.

That’s why you see many businesses, such as donut shops and other businesses with frequent low dollar amount purchases, require a minimum purchase if you intend to use a card.  This not only avoids the problem of losing money on low dollar amount purchases due to processing fees, but it can increase profits when you consider the number of people that do not carry cash.

Stop Paying Business Credit Card Rates You Do Not Know About

It is impossible to find a card with no unsavory fees.  The key is to determine which ones are worth it to you to pay.  Then, apply only for cards that charge business credit card rates you are willing to pay.  The credit card industry is fiercely competitive, and if your business credit score is solid, you can have your pick of the cards that will work best for you.

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Apple's new iPhones might not be able to charge other devices after all, says analyst Kuo

The revised prediction indicates that Apple might have encountered new issues in delivering technology that would let users charge AirPods and Apple Watches by placing them on the back of the iPhone.

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On the Wings of an Angel: 10 Top Angel Investments You Might Not Have Realized Had Wings

And How to Make Your Business a Top Angel Investment

Angel investors come in all shapes and sizes.  From investment firms to your mom, virtually anyone can swoop in and lift a company up financially.  Some of the top angel investments have become companies that change the world.  Others, though not long lasting, still left their mark. What are some of the top industries angels invest in?  What are some of the most notable investments by top firms?

The top 20 angel investors focus heavily on ecommerce, mobile, and internet. Other than these, healthcare takes most of the rest of the cake.  You’ll see all of this reflected in our list below.  Now, without further ado, our list of top angel investments.

1.      Zogenix

This is the first of four healthcare related companies on our list.  The wings under this one belong to the Life Science Angels. They focus on finding relief for those suffering from rare diseases.

2.      Akebia

This company focuses on therapies for kidney disease and was funded by Queen City Angels.

3.      Vital Therapies

Another medical company, this one’s specialty is finding treatments for those with liver disease. The angel behind this one is Boston Harbor Angels.

4.      TaskRabbit

The first on our list that isn’t healthcare related, TaskRabbit is an innovative company that focuses on helping people get things done around the house.  Rabbits can help mount and install, move and pack, assemble furniture, do the heavy lifting, and handle general home improvement and handyman projects. The angel investment firm that lifted this one up

is Golden Seeds.

5.      NoWait

NoWait is a mobile app for restaurants.  Its purpose and goal is to optimize and streamline house management.  It tracks table turnover, analytics, and even the wait list to help the whole process run smoother for customers and employees in the restaurant business.  These wings were brought to you by Sand Hill Angels.

6.      Localytics

This is a marketing and analytics app that is designed to help those in the marketing industry keep better track of what works, and what doesn’t.  Its angel funds came from New York Angels.

7.      OpenBucks

The brain machine behind OpenBucks saw a definite need and sought to fill it.  There is a large population of people out there than cannot pay for things online because they do not have a bank account or a credit card.  OpenBucks gives these people a way to make online payments through gift cards, and they give merchants a way to accept payments from this population.  TiEAngels has ties to this one.

8.      Docusign

The world was truly changed with the ability to not only send, but also to sign documents electronically.  There is no telling how much time has been saved by the use of Docusign.  Their angel wings belong to Alliance of Angels.

9.      HealthSpot

This is one of those that isn’t around anymore.  They had a strong idea with healthcare kiosks,but it just didn’t catch on.  It changed the world’s view of what medical could and should be however, and for that they earned a place on this list.  The firm known as Blue Tree Allied Angels took a chance on them.

10. DoorDash

Food delivery, both from restaurants and grocery stores, is a fierce industry right now.  Instacart, GrubHub, UberEats, and now DoorDash all want a piece of the pie.  Depending on your region, you may have all of these available, or none of these, or some combination.  DoorDash definitely seems to have a larger slice in many areas, which is why Keith Rabois lent his wings too it.  Now with Founders Fund, Rabois is a former big shot at PayPal and LinkedIn. He now stays closer to education, sports, loyalty programs, and marketplaces.

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This list of top angel investments and industries can be helpful to you, because it can help you determine if an angel investor is right for you.   However, just fitting in to what investors seem to be looking for at the time doesn’t seal the deal.  Attracting angel investors and convincing them to come along for the ride takes more effort than that.

Angel Investor or Venture Capitalist?

What is the difference between the two, and how do you know which one to pitch to? There are a few differences, and knowing them can actually help you decide.

Where the Money Comes From

Venture capital typically comes from a firm that uses a pool of money from various smaller investors.  Angel investors use their own funds, though there are angel investment firms that allow angels to pool their money.  Venture capitalists rarely use personal funds for investments.

Why and When They Invest

While both types of investors expect a profit, angel investors usually expect less.  In the beginning, they are looking more to help the business get started.  Venture capitalists tend to lend toward businesses that are already established.

This means that, while still looking for a profit, angel investors are willing to take on more risk.

Which One is Right for You?

If you are a startup, an angel investor is going to be much more likely to invest than a venture capitalist.  Often, they even come in the form of friends and family. If you do not have friends or family ready to invest, you may need to convince an unknown angel investor that you are destined to be one of their top angel investments.

How to Convince an Angel Investor to Come on Board

While there are never any guarantees, there are some steps you can take that are looked upon favorably by investors.

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  1. Don’t rush them.

Investing in a business is a huge deal.  It takes time to make such a decision, and you should not ant them to take it lightly. Plan your time table around this so you can give them the time they need without rushing them or stressing yourself out.

  1. Play devil’s advocate.

Of course, you want to show confidence, portraying your belief with certainty that everything will go off without a hitch.  However, one thing many top angel investments have in common is that they plan for the unexpected.  When you present, show potential investors that you have taken the time to consider as many scenarios as possible and have a plan for each.

  1. Be clear with the numbers.

You need to run all the numbers.  Most of your numbers are going to be projections.  You, of course, will have to show what funds you already have, how they are budgeted, and how you plan to budget any future investment funds.

What if Being One of the Top Angel Investments is Not Enough?

Say you land an angel but you still need more.  What are your options?  You can always pitch to more than one angel investor.  Many of the top angel investments have multiple angels. There are other options for small business funding as well.

With startups however, it can be difficult to find funding not attached to your personal credit, which is a major draw of angel investors.  If you have a lower personal credit score, finding funding for your business can be a huge challenge. The better option is to find funding based on your business credit.  The problem then becomes, for startups and some established business, how do you get business credit?

A new business certainly will not have a business credit score, and a business that already exists but has all funding through personal credit will not either.

How to Establish Business Credit Even With Top Angel Investments

The most important thing when establishing business credit is to establish your business as a separate entity.  This is because your business credit is a credit score just for your business.  It is not related to your personal credit score at all.

How do you do that?  It is easiest to start at the very beginning, but if you have already been running your business for a while you can still do it.

Incorporate

It is possible to run a business without incorporating, but you should definitely not skip this.  There is a cost associated with incorporation, but there are a few different options, so you should be able to find a balance between cost and what is actually beneficial to you.

Choose between organizing as a corporation, an S-corp, or a Limited Liability Corporation.  They differ in cost and level of liability protection, but they all function equally when it comes to separating your business from your personal identity.

Get an EIN

Equally as important as incorporation is getting an EIN.  This is an identifying number for your business.  It acts similar to a social security number, but for your business.  Once you have this, there will be no need to associate your SSN with your business for credit application purposes.  Applications will sometimes ask for your SSN as a way to deter identity theft, but if you have an EIN and business credit, your SSN will not be used to determine credit risk or pull your personal credit score in many cases.

Contact Information

Your business will need its own address, phone number, email address, and website.  The address should not be your home address.  The best option is an actual, physical location separate from your own.

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The phone number should be a toll-free number, and it needs to be listed in all the directories under the business name.  As for email address, it should have the same URL as the website, and not be from a free service.  Gmail and Yahoo addresses are not acceptable in this situation.

The website has to look and feel professional.  If you cannot hire someone who knows what they are doing, consider bartering.  A website is a must these days, but one that is poorly made, has grammatical errors, or with broken links is actually just as damaging as not having one, if not more so.

Dun & Bradstreet

There are a few different business credit reporting agencies, but Dun & Bradstreet is by far the largest and most widely used.  They thing is, they require businesses to have their own identifying number, called a DUNS number, in addition to and EIN, before a credit file can be opened.

To get a DUNS number, go to the Dun & Bradstreet website and apply for one.  It’s free, but they will try to sell you other services.  Resist the temptation.  You do not need them, and the number, which you do need, is free.

Open a Business Bank Account

If you have an angel investor, they will likely require this anyway.  Either way, you need a separate bank account to help separate your business from yourself for credit building purposes.  Do not pay personal expenses from this account, though you can pay yourself a salary from it.

Build Business Credit Even with Top Angel Investments

Building business credit is important even if you are able to land a great angel investor.  Once you have your business set up as a separate entity, you can get busy.  On the front end, it can seem impossible.  After all, you have to have credit to get credit, right?

angel investors credit suite

Essentially, this is true, but there are some vendors, we call them “starter vendors,” that will extend net 30 terms on invoices and report those payments to the credit reporting agencies.  These starter vendors are part of the vendor credit tier, and they do not check your credit score.

They may require you to make a few initial purchases or be in business for a minimum amount of time before they will extend net terms, but once you have those terms, you credit building will begin.  Just be sure to make the payments!  They will report it if you do not pay also, which has the opposite effect of course.

You can also request that your landlord and utilities report payments.  They do not have to, but some will if you ask.  The more accounts you have reporting on-time payments, the faster your business credit will grow.

Learn from the Top Angel Investments

What do all top angel investments have in common?  Someone believed in them.  While this has everything to do with your brilliant business idea and ability to execute, having a great start on business credit helps a ton.  If an angel investor can see that you are able to continue operations with or without their funds, they are going to want in even more. Set up your pitch, find the angel investor, and get started building business credit now so your business has nowhere to go but up.

 

 

 

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