There is a reason why 50% of American small businesses close within the first year. It’s because many small business owners are not able to keep themselves out of debt long enough to keep their companies afloat. If you have accrued a large amount of business credit card debt, you may want low interest credit cards. Luckily, there are some steps you can take to get rid of business credit card debt and put your financials back on track. Read on to learn what you can do to run your business debt-free. Expert Resources: FTC, Open.edu, Extension, Debt
Determine What You Can Afford to Pay
How much money can you realistically put toward your credit cards each month? Is there anything you can do to your budget to open up more funds for debt repayment? Only you truly understand what your financial abilities are. The thing you have to keep in mind is that you need to pay more than just the minimum monthly payments on your credit card accounts. These may keep the creditors from blasting your phone, but it won’t get you out of debt. If you truly want to enjoy financial freedom, you need to scrounge together as much money as possible to put toward your cards.
Pay Off the Small Bills First
When you think about all of the money you’re spending in minimum monthly payments (which hardly put a dent in your debt), you will soon realize just how important it is to get rid of your debts one by one. Start by paying off the smallest credit card bill first. That gets rid of one monthly payment and lowers your overall debt-to-credit ratio. Move on to the next lowest credit card bill, and so on, until you have paid off all of your business credit card debt.
Note that if you’re not paying any of your credit card bills, you have the option to either start paying minimums on everything or put even more money toward one card in particular. Depending on how big your debts are and how long they’ve been sitting on your business credit history, it may be best for you to try to pay off one card as quickly as possible and then move on to the next one. If all of your debt is fairly recent though, you may want to get in good standing with all of your credit card providers, and then apply whatever extra money you can toward the principle of your lowest card.
Consider Debt Consolidation
If you have several maxed out business credit cards, you may consider consolidating your debts into one loan or one low-interest card. This will stop you from having to pay minimums on multiple cards, and it will leave you with only one bill to pay each month. Before you commit to this though, you need to make sure that the loan or card that you are getting to cover your credit card debts has a lower interest rate than your cards currently carry. Otherwise, you will be spending a ton of money on interest for no reason.
Also keep in mind that many credit cards come with a balance transfer fee. This is a fee the card company charges for taking on the balance of another credit card. You will instantly increase your debt if you get a card with a balance transfer fee, and that may negate all the benefits that come from debt consolidation. Assess the terms of your card agreement carefully before signing up for a new business credit card.