How to Use Balance Transfers to Help Your Business

How to Use Balance Transfers to Help Your Business

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Business credit cards can be a great way to manage your company’s expenses, and take advantage of benefits and rewards along the way. But if your business racks up a lot of debt, it could be in trouble.

Some business credit cards can charge an APR upwards of 20%, which can ultimately cost you hundreds or even thousands of dollars in interest over the course of a year. Having a plan to pay it off quickly is essential, and a balance transfer can be a key part of that plan.

What is a balance transfer?

A balance transfer allows you to take high-interest credit card debt and move it to another credit card account, preferably one with a lower APR. With some credit cards, you may even get an introductory 0% APR promotion, which allows you to pay down your balance interest-free during the promotional period.

If you have multiple business credit cards with a balance, you can transfer them all to one card, simplifying your monthly payment and debt payoff plan.

There are, however, a few things to keep in mind. First, balance transfers aren’t a silver bullet for eliminating debt. While they can save you money, it’s important that you have a plan in place to pay off the balance, preferably before the promotional period ends, if you have one.

If you end up with a balance when the promotion is over, the APR may end up close to what you were paying before, potentially putting you right back where you started.

Second, balance transfers generally aren’t free. Business credit cards typically charge a fee of 3% to 5% of the transfer amount. While that may still be much less than what you’d save in interest, it’s still a cost to consider in your plan.

Also, note that credit card issuers typically won’t allow you to transfer a balance to another card they offer. So if you have a balance with U.S. Bank, getting the U.S. Bank Business Platinum Card likely won’t help you.

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How to find out if a balance transfer is worth it

While a balance transfer can be beneficial, it’s not the right path for everyone. Here are some things to think about before you decide whether to use one for your business.

How much debt do you have?

If you only have a couple thousand dollars of credit card debt and can pay it off within six months, it may not make sense to open a new credit card and pay a fee to move your balance — the costs may outweigh the savings in this scenario.

On the flip side, you may be limited on how much you can transfer. If your total debt exceeds the credit limit on the new card, you may not be able to transfer it all over.

Unfortunately, it’s impossible to know what your credit limit is going to be until after you apply. But just be aware that things can get more complicated if you can’t transfer the full balance.

What’s your credit score?

Business credit cards almost always require a personal guarantee, which means that you’re on the hook for the debt if your business can’t pay it back. As a result, business credit card issuers typically run a personal credit check when you apply.

In general, business balance transfer credit cards often require that you have good or excellent credit, which means a credit score of 670 or higher. That said, they may also review your full credit profile, so meeting the minimum credit score requirement isn’t always a guarantee.

If your credit score is below 670, though, it may not be worth applying until you can build your credit.

What’s your debt payoff plan?

It’s generally a good idea to have a repayment strategy in place before you apply for a balance transfer credit card. If you don’t have one, a balance transfer won’t solve your debt problem for you.

In general, it’s best to try to plan to pay off the debt before the promotional period ends. So if you have a card that offers an introductory 0% APR on balance transfers for 15 months, see if you can pay enough each month to get rid of the debt within that timeframe.

Business credit cards that offer a 0% APR on balance transfers

If you’re looking for a business credit card with an introductory 0% APR, here are two that will do the trick.

The Blue Business® Plus Credit Card from American Express

The The Blue Business® Plus Credit Card from American Express offers an introductory APR of  0% on purchases for 12 months. After that, the APR is 14.74% - 20.74% Variable.

The card’s balance transfer fee is 3% of the transfer amount or $5, whichever is greater. There is no annual fee.

While this card doesn’t offer as long of an introductory 0% APR promotion, it sets itself apart by offering a solid rewards program. You’ll earn 2 points per dollar on the first $50,000 spent each year, then 1 point per dollar after that.

If you’re looking for a card that continues to offer value after the promotional period is over, this one might be a better choice.

The Blue Business® Plus Credit Card from American Express
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The Blue Business® Plus Credit Card from American Express

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The bottom line

A balance transfer can help your business eliminate its credit card debt while saving money in the process. But before you apply for a card that offers an introductory 0% APR on balance transfers, take some time to research all your options to determine which is the best path forward.

Ready to see your credit data and start building better business credit? Check Your Personal and Business Credit For Free (No Credit Card Required).

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