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Clear the debt: don't hold your business back

RateCity shows you how to pay off your business credit cards and get your business out of debt and into the positive sooner.

August 25, 2010

Businesses with credit cards can reap the benefits if they're used wisely; however having a business credit card can also have its disadvantages.

No matter how much you owe on your credit card, paying off this debt can take years, putting your business at risk of financial stress, and not to mention the added cost of interest. If you are an owner of a small to medium business, it is essential that you pay your debts down first and allow your business to focus on moving forward, not backwards.

Free your business of credit card debt
No matter how much you have owing on your business credit cards, here are some tips on how you can pay your credit cards off sooner, get your business out of debt and possibly save money at the same time.

Pay more than the minimum repayment amount
Financial institutions calculate the minimum repayments as usually 2 percent of the total balance. Paying the minimum required amount could take years to pay off - whether you have a small or large debt.

For example, if your businesses credit card total outstanding balance is $7000, at an interest rate of 17.99 percent per annum, and you paid back the minimum 2 percent it will take you longer than 50 years to pay off - and that doesn't include annual fees. However, by paying more than the minimum repayment, say $300 each month you, it will take you just under two and a half years to pay off.

Alternatively, if your business is thriving, aim to pay the total balance off each month.

Compare rates
If you're having difficulty paying off your outstanding credit card balance, you should consider comparing credit card interest rates and move the balance of your current card over to a lower rate.

For example, if your balance is $10,000 with an interest rate of 19 percent, just by transferring to a lower rate card such as NAB's Business Access MasterCard (one of RateCity's top business credit cards, as at August 23, 2010) at 10.98 percent you will save nearly $430 in interest charges in one year.

To find a low rate business credit card with lower fees compare business credit cards online today.

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