Every small business owner knows the power of a good business credit card. You can use your card to rack up rewards points, access perks like insurance and purchase protections, and give yourself a little cash flow breathing room when you need to make a big investment.
For business owners with excellent credit, a certain class of business credit card—those with a 0% introductory APR period, typically lasting between nine and 12 months—is particularly powerful.
APR is annual percentage rate and it represents a holistic look at the cost of using a loan or line of credit like a credit card over the course of a year. It includes annual interest rate as well as other fees, like origination fees.
So a 0% APR for a certain amount of time means that you’ll be charged nothing—zero—for using the card. Even if you carry a balance from month to month, you’ll owe no interest payments or extra fees (as long as you pay a minimum balance and pay off what you owe by the time the offer ends).
At the end of the day, no other small business financing option offers such generous terms. Bank loans, SBA loans, long-term loans—they will all charge you some sort of interest.
If you’re able to qualify for a 0% APR credit card offer, you’ll have a limited window in which you can make the most of it. Here are six tips for using this type of credit card to the biggest advantage possible for your small business.
1. Make sure you actually need it
You accrue interest on your credit card purchases when you carry a balance from month to month. If you are able to pay off your balance completely before your due date (typically about 25 days after your bill becomes available), then you don’t owe the credit card company a dime in interest.
What a 0% APR credit card offer does is give you a break from worrying about paying off your bill in full by the due date. If you typically carry a balance, that can be a welcome relief.
But if you’re not? If you tend to pay off all your debts each month with ease and don’t foresee a large upcoming purchase or two that could change that pattern, then there’s really no point in having a 0% APR card.
In fact, at that point, you may be better off with a different credit card, with benefits and perks that align better with your needs (such as increased airline miles or cash back).
2. Be ready to use the credit card to the fullest
If you’ve decided that now would be a good time to take advantage of a 0% APR offer, make sure that you’re ready to maximize that offer to its fullest potential. For example, plan to open up your new credit card just before making some major purchases, such as equipment upgrades or bulk orders of inventory, that you expect you’ll need some extra time to pay off.
The worst thing you can do is start the timer on your limited-time offer, and then just let that offer sit unused. Try to line up a run of large (but ultimately manageable) purchases for when you’ll have your 0% APR offer ready to go. Remember, depending on the credit card issuer, this may last anywhere between nine and 12 months, so check your terms and conditions.
3. See if you can use the credit card for balance transfers
A balance transfer is when you bring existing debt (in this instance, the balance of another credit card) over to your new account. If you’re currently carrying a balance on another credit card—and paying hefty interest fees each month—see whether the 0% APR credit card offer you qualify for includes balance transfers.
If it does, you can transfer your existing debt to your new card and enjoy an interest rate of 0%, giving you a bit more wiggle room and time to pay it off.
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4. Don’t max out your available credit
Don’t mistake 0% APR with “the ability to spend money freely with zero consequences.” For one, you don’t want to overspend and put yourself in a hole you can’t dig yourself out of by the time the card’s standard APR kicks back in.
Additionally, spending to the point of maxing out your available credit line on that card messes with your credit utilization ratio. This ratio shows how much money you’ve spent relative to the credit available to you—and lenders use it assess how responsible you are with credit.
Typically, lenders are wary of business owners who have a credit utilization ratio of over 30%. Try not to carry a balance well above that number for too long, or you’ll find lenders will turn you down if you seek a larger chunk of financing via a business loan.
5. Pay your minimum balance
This has already been referenced, but it’s worth emphasizing again. You still need to pay the minimum balance owed to the credit card issuer each month. In some situations, failing to do so can mean losing your 0% APR offer altogether. Make sure you budget for these payments each month, as well as for paying off the balance in full by the time the introductory offer ends.
6. Know when your offer ends
Don’t let the end of your offer sneak up on you. Read the terms and conditions and speak to your credit card company when you first receive your card, so you know exactly when purchases will begin accruing interest again.
That post-introductory APR may be higher than what you’d pay on a more affordable business loan or line of credit, and you can very quickly put yourself into debt without another 0% APR lifeline to help pay it off.
Final thoughts on 0% APR credit cards
As a small business owner, it’s your duty to know and understand all the financial tools available to you. A credit card with this kind of offer is truly elite and should be used carefully in order to maximize your chance of succeeding with it. Follow these tips and you’ll be in good shape to obtain another low-cost financing product, such as an SBA loan, once your offer ends.
RELATED: 5 Business Credit Card Myths That Can Cost Your Business
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