How to know if a 0% APR Business Credit Card is right for your small business

Many credit card issuers offer business credit cards with an introductory 0% APR for periods of six months or more.  These 0% APR business credit cards (also called interest-free or free period credit cards) may be a good tool to help manage your business finances and grow your business.  You can transfer balances from other credit cards to reduce the amount of interest you are currently paying on other credit card balances, make purchases or pay bills directly with the 0% APR credit card, or use the cash advance feature of the 0% APR credit card to pay other loans or vendors that do not accept credit card payments. It’s important to choose a credit card that fits your business’ needs so you can grow your business and not add unsustainable debt.  

 How do 0% APR business credit cards work? 

Business credit cards come with different 0% APR introductory periods and different fees. 0% APR credit cards allow you to make purchases or other payments without paying interest for a limited period of time. Once the interest free period ends you will pay interest on any outstanding balance and on any new purchases or payments at the credit card’s regular interest rate. You may also incur fees during the interest free period that are added to your credit card balance.  

In order to take full advantage of a long introductory 0% APR business credit card, you need to factor in the length of the 0% APR period, any fees related to the use of the credit card, your spending needs, and your monthly budget to make timely payments. For example, in order to avoid incurring interest on a $10,000 purchase made under a 6-month 0% APR introductory period will require a monthly payment of at least $1667. The same purchase, if under a 12-month introductory period will require a monthly payment of at least $334. 

Other factors to think about when considering applying for a 0% APR business credit card are whether or not the issuer offers instant approval, if there are any other welcome offers or card perks (like cash back, points, or miles), any other promotional offers from the issuer, and whether or not you are likely to meet the credit requirements. You may apply directly to a card issuer or you may engage the services of a credit card broker to help find an appropriate 0% APR business credit card. Credit card brokers charge fees for their services. 

Pros and cons of 0% APR business credit cards

Pros: 

1. No interest for a certain period of time: Any purchases you make during the introductory period will not accrue interest. Most credit cards offer between six to eighteen months of no-interest purchases (for some, this would also apply to balance transfers). 
2. If you have a large purchase you want to make, like inventory or equipment, but you need time to pay it off, a long 0% introductory APR period credit card will help you manage your finances. 
3. You can lower higher credit card balances by transferring high-interest rate credit card debt to a credit card that is offering a 0% introductory APR on balance transfers. 

Cons: 

1. The 0% APR has an expiration date: Once the 0% introductory period is over, the normal APR (exact rate will be determined based on your creditworthiness) will kick in. Be careful if you plan on carrying a balance forward past the introductory 0% APR period, as the regular APR might not be low and you may end up paying more in interest. 
2. Balance transfers are not a guaranteed feature of certain 0% APR business credit cards. It’s important to read the terms and conditions of the credit card you are considering to make sure that balance transfers are eligible for the promotional 0% APR before you commit to the card.
3. Typically, you’ll still need to pay a balance transfer fee, even if the card allows a 0% introductory offer. This is typically 3% of the transferred balance, so it could be a considerable amount of money you’re paying in fees if the transferred balance is large. Make sure you crunch the numbers to evaluate if a balance transfer will save you money long-term. 
4. Cash advances generally incur fees although the new balance is covered by the 0% introductory rate. 
5. Late payments (and similar behaviors) can make you lose the introductory period. Some issuers’ disclosures state that they have the right to end the introductory 0% APR period. You may even then get slapped with a penalty APR, which can be much higher than normal (up to around 30%). 

Is a 0% APR business credit card for you?

If you are looking to consolidate high-interest credit debt and/or need to make a large purchase in the near future, and you’ve done the math to see if your cash flow can support the monthly payments, a 0% APR business credit card could be a good option to grow your business. 

Now that you are armed with information about 0% APR credit cards, we hope that you are more informed about this type of business financing that will help you to reach your business goals and grow your business.  Funding Circle and our network of lending partners can provide your business many different options for all your financing needs, such as business line of credit, term loans, and invoice factoring.

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