Half Glass Full: Business Credit Cards Better Than Ever for Responsible Borrowers

If you perform an internet search on “business credit cards”, you will more than likely return a myriad of results that paint them in a bad light simply because there are no added protections for card holders under the Credit Card Accountability and Responsibility and Disclosure Act of 2009 (CARD). The legislation was designed to protect not-so-savvy consumers who may experience drastic, unexpected interest rate hikes by not-so-honest card issuers willing to take advantage of them. Many business credit card holders were surprised to learn that CARD does not protect them, and so journalists far and wide are shaking their fingers at business credit cards, warning possible applicants against the ‘pitfalls’ of applying for business or “professional” credit cards.

These naysayers are not telling you the whole story.

For responsible credit card users, now is a great time to apply for a business credit card and use the current economic slump to your advantage. The Wall Street Journal reports that after CARD was enacted, credit card issuers mailed out 47 million professional offers in Q1 of 2010, a 256% increase from the same period last year. Why the huge jump? Because business owners are tightening their belts and postponing expansions, causing credit card issuers to lose profits. In a scramble to increase their own bottom lines, card issuers are relaxing certain application criteria for business (or “professional”) credit card applicants and beefing up the card reward programs. For instance, the Ink From Chase business credit card application has been changed to help make approval easier. The same Wall Street Journal article reveals that January 2010 mailings for the Ink From Chase card required applicants to provide the name of their company, the nature of the business, its address and its federal employer identification number. Solicitations in July, on the other hand, only required applicants to check a box that said ‘Yes, I am a business owner’ or ‘Yes, I am a business professional with business expenses.’ A Forbes blog also reports that the Ink From Chase card pays 3% back on fuel, home improvement, dining, and office supplies, as well as 1% on everything else. Small and home business owners are well able to combine personal and business expenses, making this and other similar business credit cards a very attractive option for business and even personal finance.

So, despite the lack of added protection by the Credit Card Accountability and Responsibility and Disclosure Act (CARD), these new and improved professional and business credit cards with expanded rewards programs can actually prove to be advantageous for the right kind of card user.

But who is that, exactly?

If you have a good credit score, pay your balance off every month, and do not usually incur late payment fees, the current economic climate has blown the winds of opportunity in your direction. Since the lack of added consumer protection in CARD only affects credit card users who tend to carry balances and are at times delinquent in their payments, these penalties are not a major source of concern for business owners who are conservative in their spending, keep good records, and pay off their credit card bills by the end of each month (at least most months). Getting a new business credit card now, while issuers are still looking to woo new applicants, can help build your business credit score and set you up nicely for the time when banks begin offering better business loans and you are ready to expand.

Don’t let the mainstream media tell you that this glass is half empty - it’s really half full.

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Debit or Credit - Is There a Right Answer?

In this day and age, paying with plastic is no longer just for the wealthy and the well-to-do. It’s commonplace to see someone pull a card out of their wallet to pay for purchases. These days, Visa and Mastercard debit cards empower anyone with a bank account to forego paying with cash. According to the Federal Reserve,

“In 2006, for the first time, consumers paid for more purchases with debit and credit cards combined than with checks. Debit card use is growing especially fast; debit cards have surpassed credit cards as the most popular electronic payment.”¹

With the use of debit cards rising the way it is, you no longer hear merchants ask, “Would you would like to pay with a credit card” - they now simply ask, “Debit or credit?”

But which is the right answer?

There are certain instances in which debit card use is the obvious choice. When you have problems obtaining credit or when you are not able to pay off balances in a timely fashion, debit cards are the way to go. You can use them like credit cards to make purchases online and by phone, and carrying a debit card is safer than carrying cash. However, there are some good reasons not to use debit cards that may surprise you. The following video explains what those reasons are:



As you can see, for all the perceived dangers involved with habitually charging purchases with credit cards, paying with debit cards poses unique risks as well. For consumers who are able to pay off their balances monthly, using credit is often a wise and profitable option compared to debit. Bankrate also provides information on how paying with credit can be beneficial:



Using credit for major and regular purchases is good for your financial health. There are so many benefits to managing your money by paying with credit that it’s hard to imagine not doing it. Savvy consumers also pay with credit in order to take advantage of the rewards offered by card issuers. For example, the Discover More card has an attractive rewards program that include:

• $40 Cashback Bonus when you apply
  
  
• Up to 20% Cashback Bonus® when you shop online
  
  
• Unlimited cash rewards, automatically
  
  
• Double rewards when you buy from more than 80 Cashback Bonus Partners

You can actually earn money by using a card like that, all with 0% intro APR and no annual fee. If you paid cash for the same purchases, you wouldn't receive anything extra at all. These kinds of rewards plus the added buyer protection and convenience that comes with proper credit card usage are why so many people who could pay with cash opt for credit instead. Those benefits alone may be enough to inspire you to commit to disciplining yourself to use your credit more wisely from now on. If you don’t yet have any credit, using credit cards the right way from the start will help you to develop a stellar credit rating that will pay off for years to come.

So, the next time you’re asked, ‘debit or credit', think first - the best answer may be ‘credit’ after all.


1 http://www.usatoday.com/money/perfi/credit/2008-07-31-credit-cards-debit_N.htm

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Using Business Credit Cards To Make Ends Meet - A Growing Reality

It’s reasonable to argue that small business owners are feeling the effects of the global credit crunch most of all. Small businesses use credit for capital purchases, operations, and payroll, so when banks stop lending, small business owners find themselves in hot water. This year’s stock market crash has sent the global economy into a tailspin, and the Congressional bailout plan hasn’t stabilized financial markets the way the Fed and the Bush administration hoped it would. Instead of using the money to sustain or increase lending, banks are using the bailout funds mostly as a cushion for their own operations, which is killing many small businesses. Big businesses and big banks made poor choices; now small businesses are left holding the bag.

That’s why business credit card usage is steadily increasing.

Many business owners are now using business credit cards to make equipment and inventory purchases to make up for their dwindling credit lines. Banks are not loaning as much as they used to and not nearly as often, so many small business owners have had to use credit cards to make up the difference.



The problem with using business credit cards like traditional lines of credit is that they are not designed to for that kind of usage. Business credit cards are supposed to be used for expenses in daily operations and minor purchases. However, these tough economic times are forcing business owners to make major purchases on credit cards, putting both their personal and business finances at greater risk. Most business cards require the cardholder to provide a personal guarantee, and all charge interest when balances are not paid off every month. It’s most likely that daily expenses will be covered monthly; however, running a business on credit cards costs the business more because of the interest and fees associated with credit cards.

So, what is a struggling business owner to do?

If you absolutely have to use business credit cards in non-traditional ways, you should get the best cards available. There are small business credit card resources that provide access to deals that allow business users to transfer balances with no fees and make new purchases with an introductory 0% APR. The rewards packages on many of these cards may also help you cut costs by making certain services and modes of transportation cheaper or even free. Performing a balance transfer to a new business card once or twice a year is an easy way to avoid paying interest on an outstanding balance, so it's a good idea to pay attention to all those snail mail business credit card offers you likely receive on a regular basis. Bottom line: if you can take advantage of favorable credit card offers when they are available, then you should.

Sooner or later the economy will recover, but until it does, small business credit cards may be the best financial tools available that can keep small business owners afloat.

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Bad Credit, No Credit - Big Problem

“Bad credit, no credit - NO PROBLEM”. Have you ever heard that catch phrase on a TV commercial or seen it on a billboard? Used car salesmen and sub-prime mortgage lenders have practically burned that slogan into the psyche of working class and young America. Of course, we know that potential financiers use such tactics to woo customers into signing for what many would call bad loans, but the reality is that bad credit really is a problem. It can be extremely hard to make ends meet without any credit cushion at all, and the current state of the economy is only making matters worse. Although Congress agreed to a $700 billion bailout plan for America’s largest commercial banks, these lending institutions are actually lending less, not more. The reins have been pulled in tighter, and it is nearly impossible to get a decent loan these days, even for applicants with good credit.

So what do those with bad credit and no credit do?

If you search diligently enough, you can find credit cards designed for people with bad credit. The idea is to approve you for a very low credit limit to help you rebuild your credit. As you pay off your balances on time and develop a positive history, you can qualify for credit increases. It sounds like a good option for starting over - until you read the fine print. The following video highlights the terms and conditions on one of these cards and it will shock you to learn just how terrible a deal this is!



If that kind of card was your only credit option, you would be in pretty bad shape.

The good news is that such a poor deal isn’t your only option. If you have bad credit or no credit at all, consider applying for the Discover More credit card. Discover More offers 0% intro APR on balance transfers and new purchases, and a 5% cash back reward that tops just about all competitors. Because the credit card industry has trained consumers to believe that exclusivity is a sign of quality, many people have been led to believe that Discover is somehow a sub par credit option. The hit prime-time cartoon series Family Guy has even poked fun at Discover.


What’s not funny, however, is applying for credit from one of the more “exclusive” companies and being rejected. Rejection doesn’t just hurt your ego; it hurts your credit rating, too. So, although Peter Griffin had a good time delivering the bad news to that potential patron, it’s actually good news for you. If your credit rating declares you to be just “anybody”, then you may actually have a good way to help rebuild your credit with the Discover More card.

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Predatory Lenders on College Campuses Teach the Wrong Lessons About Credit

My husband likes to tell me about his college days, in the early 90s, before I knew him. One of his favorite memories is about his first experience with credit cards. He remembers being a college freshman, new to northern Michigan, stepping onto the campus for the first time. Expecting to be greeted by helpful upperclassmen and faculty who were there to escort him into the beginning of the rest of his life, he had a rude awakening - he was greeted by ‘the credit card guy’.

Still a fairly new marketing tactic at that time, campus recruiting by credit card companies was not looked down upon as the sleazy and unscrupulous predatory practice that it is. Older brothers, sisters, and cousins did not yet know to warn their younger relatives about ‘the credit card guy’ that would find them in the student center. The idea that you could get a free long distance calling card, T-shirt, or pizza just for filling out a short application was too good to pass up. Credit card companies know that starting college is an exhilarating experience; you feel empowered to make adult decisions, typically for the first time in your life. So, ‘the credit card guy’ makes sue that the very first ‘adult’ decision you make is to get a credit card you know nothing about because you want free pizza. Although the credit card companies claim that they are providing a valuable service to studnets, U.S. News and World Report agrees that this practice is questionable at best:



Just like many other unsuspecting freshmen, this campus recruiter convinced my husband that he needed a credit card, so he applied and was easily approved. Happy about his newfound freedom and means, he told his older brother about his credit card, expecting a good pat on the back. Instead, his brother was outraged. He had a steady job and living arrangements, paid his utilities on time, and was basically doing everything he could do to be financially responsible, but he couldn’t get a credit card to save his life. He was repeatedly denied because he didn’t have enough assets or income, according to the credit card companies. His little brother didn’t even have a job, and he just waltzed onto a college campus and got a card with a $500 limit? How unfair! Living on his own, he really needed credit to take care of business, yet his little brother, with absolutely no way to repay his debts, was able to get what he had been working hard for by simply checking “yes” in the box marked, “Are you a student?”

Needless to say, my husband was shocked and confused.

Now, in hindsight, he can see why his older brother was so angry. While his brother had intended to be responsible with credit he could not attain, my husband was absolutely irresponsible with credit that he did not have to work for at all. It helped to warp his idea of the purpose and proper use of credit, which took years to undo. However, because it caused him to plummet into debt so quickly, he can see why he and other college studnets were targeted. Low income plus easy credit equals a lifelong customer for credit card companies. With mass marketing of financial products to and predatory lending becoming a part of mainstream American culture over the past 20 years, young people and people with low incomes can almost expect to be able to get something for nothing. That’s why the mortgage industry crisis has crippled our economy. Sub-prime mortgage lending was ‘the credit card guy’ of the housing market.

Except no one got a free pizza.

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Protecting My Identity As I Build My Credit

I am not even 30 years old, and I have already had my identity stolen twice. It’s easy to assume that I may have been irresponsible with my personal information, or must have at least had my purse stolen before. There has to be a logical explanation, right? The fact of the matter is that I didn’t give out my social security number any more than anyone else going to school and working a job. I protect my belongings and my personal info like a lioness protects her cubs. Yet, it still happened, and it makes me more cautious -- even paranoid -- about the methods I use to rebuild my damaged credit.

A few years ago I learned that a woman in Wisconsin was using my social security number. She wasn’t buying extravagant luxury items on credit cards in my name. She was working and acquiring basic necessities, including average consumer credit, with my number. An expert in the field of private investigation informed me that oftentimes young people with average to slightly blemished credit histories have their social security numbers stolen and sold illegally to adults who do not have social security numbers, who need them to work and acquire basic necessities. If they do not go overboard in their spending and they pay their bills on time, their activities often go unnoticed.

I also had my identity stolen by a family member. Despite careful protection of my personal belongings, a desperate relative went rummaging for identification information - right after I openly stated that I had gone to the Secretary of State to renew my license. I didn’t put it together until after the culprit was discovered, but that didn’t happen right away. I had to argue with the local Social Security Administration office about when and where I applied for my last duplicate card before I realized that someone close to me had pulled a fast one.

I have always heard the gurus say that in order to build credit you have to have credit; using credit cards responsibly and spending less than you make is the only way. Well, how do you do that without putting yourself at risk? If someone gets a hold of my social security number, they will be able to access those credit accounts and use my credit illegally. What if someone intercepts my credit account statements? These days I protect my social security like the Hope Diamond, so I want to build my credit while using my social security number as little as humanly possible.

That’s why I like prepaid credit cards.

Your social security number is not connected to a prepaid credit card; you simply load it with cash and use only what you have on it. If someone finds your lost card, they can’t use it to follow any paper trail to your vital information. Since you can’t use cash to make online purchases, secure rental vehicles, make hotel reservations, etc., plastic is a must-have necessity for living. However, if you want to be able to live without your social security number being a big red target for thieves, you can use prepaid credit cards to do so.

I am particularly impressed with the AccountNow Visa because it includes credit reporting! That’s right, if you make bill payments with the AccountNow card, you can get positive credit reporting to assist you in building initial credit history or rebuilding damaged credit. It is truly possible to make strides toward a healthy credit score while minimizing personal risk.

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