Paying Yourself with Credit Cards Should you use low-interest credit cards to fund your homebased startup? Our experts weigh in.
Opinions expressed by BIZ Experiences contributors are their own.
Q: Should I use zero percent interest credit cards forincome until my homebased business picks up? I don't want touse any more of my savings, nor do I want to jeopardize my goodcredit.
A: It's not unusual for BIZ Experiencess to use creditcards to fund startup operations. In fact, according to FederalReserve data, credit cards account for 39 percent of small-businessborrowing. So should you take advantage of offers for "freemoney"?
Keep in mind that credit card companies make these offersfiguring they'll make money. Zero-interest time periods rangefrom six to 12 months. If you don't repay the money you borrowbefore the credit card starts accumulating interest, high interestrates kick in. You need to pay attention to the number of monthsthe introductory rate lasts and what the rate will be when theoffer expires.
Credit card companies make money other ways, too, so make sureyou:
- Pay on time. Make the minimum payment within a day ortwo of receiving the bill. Credit card companies are known to takeseveral days to post payments, and the penalty for being late canbe stiff late fees or moving you into a default interest rate thatcan be nearly 30 percent!
- Determine whether there's a fee for transferringbalances or cash-advance checks. Are there other charges specifiedin the fine print?
- Verify that the zero percent rate applies to purchasesas well as transferred balances and cash advances.
If you don't want to dip into your savings, be sure you canpay back the amount you borrow when the offer period ends. Alsokeep in mind that opening successive credit card accounts can loweryour credit score.
