Don’t worry this isn’t your regular “boring investment book”. It’s a simple and easy to understand book that gives advice about investing and finances in general, with a different spin.

The illustrations (aka sketches) are done with a sharpie and white napkin. It’s this simplistic approach that’s intriguing and not boring at all. It easily makes the list as one of my favorite books.

What is the Behavior Gap?

The Behavior Gap is the difference between investment returns and investor returns. Here’s how Carl explains it:

“In general, we’re bad investors,” says Carl. “We tend to buy high, sell low. This behavior creates a gap between investment returns and investor returns.”

Carl believes success with investments and the stock market isn’t about skill, but rather behavior. This shifts more of the blame onto financial advisors (and ourselves) for reacting too emotionally and not using a little common sense.

 About the Book

This book is divided into 10 chapters totaling 176 pages:

• Chapter 1 – We don’t beat the market, the market beats us
• Chapter 2 – The perfect investment
• Chapter 3 – Ignore advice, make fun of forecasts
• Chapter 4 – Financial Life planning
• Chapter 5 – Too much information
• Chapter 6 – Plans are worthless
• Chapter 7 – Feelings
• Chapter 8 – You’re responsible for your behavior (but you can’t control the results)
• Chapter 9 – When we talk about money
• Chapter 10 – Simple. Not easy

At the very beginning of the book during the introduction, Carl talks about owning four pairs of skis. Which is a simple analogy for us to understand that sometimes having more options, means more confusion and less simplicity. Having too many complicated options causes a lot of stress and leaves room for too many mistakes.

Some of My Favorite Sketches

It’s pretty hard not to completely enjoy this book, since it caters to those who enjoy reading as well as a visual audience of readers. Here are two of my favorite sketches from the book.

Our current investing strategy

Our current spending strategy

Are you seeing the common problem here? When Carl explains it visually like this, it’s hard to refute that we don’t always use the smartest methods when it comes to our finances. These black and white sketches easily support “a picture is worth a thousand words”.

I highly recommend this book and once you start reading it, I promise you won’t want to put it down. It’s one of those books I’ll grab when I need to remind myself to calm down, and think about investing more logically.

About the Author

“Carl Richards became an accidental artist with his simple sketches that make complex financial concepts easy to understand for thousands of people every week on The New York Times Bucks blog. Richards’ art, which he refers to as Visualizing Finance, had its first showing at the Kimball Art Center, in Park City, Utah. His commissioned work is on display in businesses and educational institutions across the country.” - Source

Connect with Carl or Buy the Book

• Buy the Book on Amazon
• Behavior Gap Website
• Twitter
• Facebook

[I did not get paid to write this, and I did personally read the book. As always, the opinions expressed are my own.] 

Photo Credit: BHG

However, the receipt is much more than an itemized list of your total purchase; it’s a versatile, invaluable tool that offers more savings opportunities than your average coupon.

Don’t let your next receipt become a crumpled mess at the bottom of your purse or the floor of your car. Instead, treat it with the respect it deserves and use it in one or more of the following ways to help you save money.

1. Easy Returns
Receipts cure buyer’s remorse and allow you access to a full refund when a purchase doesn’t work out. Granted, some retailers like Walmart don’t require a receipt for select returns, but ultimately the process goes more smoothly with proof of purchase.

2. Missed Discounts
I recently purchased art from Bed Bath & Beyond and failed to bring a coupon offering 20-percent off. After blogging about my experience, a reader advised me to bring in my receipt with the coupon to receive a credit. Who knew? Though not all retailers have this policy, it makes receipts all the more valuable for those that do.

3. Price Adjustments
There’s nothing worse than purchasing something and finding it on sale a couple weeks later. Thankfully, most retailers have a price adjustment policy that provides credit in the amount of the discount if your purchase goes on sale within a specified time frame. Monitor deal sites like FreeShipping.org for sales and discounts once you’ve made your purchase, and return to the store immediately when you see a price drop.

4. Customer Surveys
Your eyes may glaze a bit when the cashier explains a customer survey opportunity, but pay attention. These automated surveys take less than five minutes to complete and result in great savings opportunities. I took two surveys last weekend and now have $20 of free money to spend at my favorite stores.

5. Local Coupons
Some receipts have coupons and special offers printed on the front or back side of the printout. Before cramming the proof of purchase in your bag, be sure to review it for potential discounts. Most offers are for local products and services.

6. Accurate Records
Maintenance records ensure you don’t get charged for something covered under warranty, and also help you avoid redundant services by sneaky mechanics. Additionally, accurate records of regular tune-ups and tire purchases are essential in getting the best price when it’s time to trade up. For more reasons to keep your maintenance receipts, check out this article from ShopSmart.

7. Catching Errors
Cashiers are busy people, hurriedly checking out the masses while feigning interest in your day. They’re bound to make a mistake — whether it’s scanning something twice or failing to notice your stack of coupons — and the receipt is the only proof to show you were overcharged. Similarly, you make mistakes, too; During a recent trip to the store, my husband and I returned a pack of golf balls we thought were $6 but actually rang up for $20.

8. Rebates
Have you ever tried to get a rebate without a receipt? It’s not possible. In order to get money back on that pricey laptop or smartphone, you’ll need the original receipt, barcode cut-out and your first born. Do yourself a favor and complete the rebate forms the moment you get home to avoid losing the receipt and ensure prompt payment.

9. Itemized Deductions
If you work from home or are otherwise self-employed, receipts are your ticket to important deductions come tax time. Create a file in which you can immediately place all business-related receipts — like dining, supplies and mileage — so you’re not scrambling a few days before April 15 to find what you need. Consult this IRS article for a list of eligible deductions.

10. Employee Reimbursements
For those of us still tethered to a boss, receipts are our proof of purchasing something on behalf of the company. While most managers will be reasonable if you misplace a receipt for last week’s birthday cake, you make it much easier on the accounting department by keeping track of it.

Has keeping your receipts saved you money? 

About the Author:

Kendal Perez is a frugal fashionista and bargain shopper who helps fellow shopaholics find hassle-free ways to save money. As the deals expert for FreeShipping.org, Kendal has the resources to be an extreme couponer but prefers a less complicated approach to staying in-budget. Kendal has been quoted in such media outlets as CNN Money, TIME Monelaynd, FOX, ABC, NPR and Kiplinger Personal Finance. For savings tips and more information, visit HassleFreeSavings.com

Photo Credit: comedy_nose 

I do a fair amount of flying on airplanes, as well as driving across the country (and especially across the state of Texas). Here’s a few travel hacks I’ve discovered along the way.

1. Compare the cost of driving vs flying

With the price of gas these days, purchasing a plane ticket might actually cost less than driving to your destination. Compare the cost with a tool like a Fly or Drive Calculator from BeFrugal. It takes into account the total expense, carbon emissions and the time it takes to fly or drive, to help determine the best travel method. Here’s how my trip comparison turned out:

I didn’t realize flying could be so much cheaper than driving, even when I factored in the price of the round-trip ticket. Flying also puts out less environmental emissions, which is a good thing.

2. Find free or discounted entertainment

Free-Attractions.com offers a complete list of free museums, free parks, free concerts, free zoos and more, at over 1,500 cities across the United States. Start by inputting your city and state, look through all the free activities that are available, then pick your favorites and go. This is also a great idea for those times when you’re stuck at home and can’t travel too far.

CityPass.com  offers an activity book that costs around $30 – $60 (depending on the location) for major cities across the country. I purchased a City Pass booklet last year when I visited Seattle. Which included a trip to the Space Needle, the Aquarium and the EMP Museum – where they had a special exhibit of Battlestar Galactica (I’m a geek at heart). It also includes coupons for food and other popular tourist attractions.

Entertainment.com has an entertainment coupon book that includes discounts for retail shopping, dining out, grocery shopping, car rentals, sporting events and tons more. For $15 you will get over $1,000 of coupons, savings and discounts. They have a much broader range of cities where you will be able to benefit from the savings compared to City Pass.

3. Earn travel rewards – with or without a credit card

Travel rewards programs aren’t always as free as they might appear. Be sure to read the fine print to see if your credit card company has any redemption restrictions. Rewards are available in two basic types:

• Frequent-flyer rewards programs provided by a specific airline company
• Credit-card rewards programs that earn points from everyday purchases

If you use a credit card that offers travel rewards and points, then by all means please take advantage of it. If you don’t want to use credit to book your summer travel plans, you can still earn rewards and points without a credit card. Sign up for a hotel’s loyalty program, earn frequent flyer miles and lots more – with or without a credit card.

Make the most of your loyalty programs by using Points.com, which let’s you exchange, trade and redeem rewards from airline frequent flyer miles to hotel points, from credit card rewards to gas and drugstore cards. For instance, I have racked up a lot of points with American Airlines, but with Points.com I can trade my points for Delta or JetBlue vouchers instead.

4. Use online coupons and discounts

By doing a brief search for free coupons and promo codes on discount sites, you can save big by taking advantage of great deals (for example: 20% off airfare, a free car rental for a day or $25 off NYC hotels). You can also earn cash back on transactions (that’s deposited in your free account) on any travel booked online, in addition to saving money with coupons.

Search group buying sites like Groupon or Google Offers for dining, hotel and entertainment deals. Not only will you find discounts for 50% off or more, you can earn cash back when your Groupon deals are bought online.

5. DIY and plan in advance

By doing it yourself I mean, pack your food and snacks instead of stopping at convenience stores or buying pricey food at the airport. Bring your own headphones, magazines and books instead of buying them along the way.

Plan your trip in advance to see if you can stay with family and friends to cut down on accommodation costs, or borrow an extra vehicle instead of paying for a car rental. Planning ahead will also ensure access to some of the best deals and offers available.

To sum it up: you can still make traveling this season a priority, if you’re creative and start applying a few of these travel hacks. My travel budget is pretty small, so I’m always looking for ways to have fun while on a budget.

Do you have any travel hacks to share?

Photo Credit: hoyasmeg

As if relationships weren’t crazy enough, add in our careers and making money means you’ve got a potential recipe for a stress disaster. Which is how I’ve felt lately.

Within the next few weeks I should be able to payoff my car loan and be completely debt free. But of course life doesn’t always go as we plan, and I’ve had several financial setbacks and all these added expenses keep popping up.

So I’ve been trying to keep everything in perspective and to remember the big picture. Life isn’t always as complicated as we make it and everyday is a new beginning. Sometimes we just need a little motivation not to give up.

How do you keep yourself motivated when you’re ready to give up?

Even with the best technology, apps and financial tools available, the only thing that’s helped me stick it out is reminding myself of why I’m doing this in the first place. I had to find inspiring reasons to live a debt free life.

The awesome thing about finding inspiration for your personal finance journey means there aren’t any rules. Inspiration can come from anywhere (or anyone) in any form, shape or size. Here’s a few things that inspire me.

Freedom to choose

Going through the latest economic recession has taught many of us valuable life and money lessons. Our futures aren’t as secure as we thought, we took too many risks and didn’t educate ourselves about proper money management. But after that all came crashing down, we learned that we’re stronger, more resilient and smarter because of the experience.

Becoming debt free alleviates some of the pressure from bills and lets us choose what we want to do with our money. It opens up opportunities to save more, invest more, give to charities and help our kids go to college.

Lead a passionate life

This is one of the inspiring reasons I wanted to become debt free. One of my passions is traveling, so not having any debt means I can see the world and become location independent with my career. I can create a job that revolves around my life instead of my life revolving around my job.

Living with less debt means more freedom to see family and friends whenever we like, or take time off work without wondering how we’ll pay the bills when we get home. It’s the opportunity to live a more stress-free life, make decisions based on what we really want and follow our passions.

Peaceful relationships

Being in a relationship, whether it’s with your kids, your partner or your peers is always more difficult when you add money to the mix. Money fights and money arguments are one of the main reasons couples get divorced, and it’s the biggest reason my past relationship failed too.

There are so many more important things to work on in a relationship than to constantly worry about money. While becoming debt free won’t solve all relational issues, it definitely brings more peace and stability to the situation.

Better retirement

Recent studies have shown that many retirees have been unable to quit their jobs and retire when they originally planned. They weren’t able to save enough for their future during their working lives, and are having to work longer or scale back their lifestyles in their retirement.

As mentioned above, freedom from debt means we have more control over our future and retirement savings. We won’t need to rely on the (broken) Social Security system or get financial help from our kids. We can be financially independent and enjoy our retirement years.

These are just a few examples of what being debt free can mean. Now it’s your turn to share.

What are your inspiring reasons to become debt free?

Photo Credit: carolynconner

I’m Jana. I blog at Daily Money Shot, where I ramble about money at the intersection of life, pop culture and everything in between. And I’m thrilled and honored to be guest posting today at Careful Cents.

On Mother’s Day, Carrie wrote a wonderful tribute to her mother and honored her by talking about the different financial lessons she passed on. That post got me thinking about the kind of financial legacy I’m leaving my daughter.

I don’t come from a line of financially savvy women. My mother and grandmothers basically relied (or rely) on their husbands to do the brunt of the financial grunt work (paying the bills, managing insurance, monitoring investments, etc) and the attitude that was passed down to me was that a man will take care of it for you.

My mother and grandmother shop for sport (seriously, if shopping were in the Olympics, they’d medal. Every. Single. Time). My mother has no idea how to balance a checkbook and her idea of scaling back is Dunkin Donuts coffee once a day and manicures twice a month. It’s kind of depressing, really.

Since I’m in the habit of breaking bad familial cycles, this is one I’m definitely taking on. I don’t want to be responsible for a 4th generation of women who haven’t taken charge of their own finances. So I did what I needed to do. I educated myself. I read blogs and books.

I took over our family’s finances and I’m now the primary financial manager. And it is my job to impart that knowledge onto my daughter. But if I had to pick 3 things I hope she learns, here they are:

1. Be an active participant in your household’s finances. Sitting back and letting someone else control your entire financial future (and present) is not a wise choice.  She needs to know that if her money is contributing to the household, then she has a right—no, an obligation to understand how and where that money is being spent. She needs to know that she has just as much of a voice in deciding how to spend their money as he does. And she needs to use that voice to share her opinions and thoughts, particularly on major decisions like buying a house or a car. If there’s no husband, there’s no reason she can’t take charge of these decisions for herself.
2. Understand your money and where it’s going. She needs to understand just how important it is to know what her money is being used for. This goes hand in hand with taking an active role in her finances. I want her to have a budget and know how to develop one. Know how to pay bills. Learn when those bills are due. Know what accounts have been opened and how to access them.  Discuss long term investments with your husband. Understand the different types of investments. And if there’s no husband, again, that’s okay. She can do this all on her own.
3. Have a backup plan. Things, and life, happen. Husbands cheat, leave or die. Jobs disappear. People get sick. And while it’s not fun to dwell on events like these, it’s impractical not to. Speaking from firsthand experience, having a backup plan is essential to manage these types of situations. I want her to know that, while it’s perfectly acceptable to focus on Plan A, there needs to be a Plan B waiting in the wings. Just in case. I don’t want her left in a lurch because she failed to plan accordingly. Although I hope she never needs to use her Plan B, it needs to be there.

I’m sure there’s a lot more I want my daughter to learn from me. Like, don’t spend more than you earn. Or always have an emergency fund. Or don’t make big, impulsive, long-term purchases. Or that having debt will hold you back from your dreams.

It’s a pretty extensive list, now that I look at it. But I need for her to know these things. I need to break the cycle of female financial ignorance that’s been coursing through my family. That needs to be my legacy.

What financial legacy are you leaving for your children? 

Photo Credit: pocketwiley

Here’s a few things she taught me about life and money.

Always know the balance in your checkbook

In my family, I’m infamous for telling my mom to “just write a check for it”. Anytime I saw my mom make a purchase, she wrote a check. So naturally, being the smart 8 year old that I was, I thought as long as you had checks, you had money.

One day she sat me down and taught me how to write a check on my own, record it in the checkbook register and subtract it from total balance. I guess I have her to thank for my love of accounting, because ever since then I’ve been fascinated with accounts, ledgers and balance sheets.

Everyone needs their own side money-making project

Although she was a stay-at-home mom, my mother always had a side money-making project. She came up with many entrepreneurial ideas to make money working from home. She started a very successful jewelry making business, even before there was anything like Etsy or eBay.

She was an expert seamstress who sewed and embroidered all kinds of custom clothing. Her stuff was so popular, when she held yard sales, people from all over the city would line up down the street waiting.

She would stash away money for family vacations, romantic weekend getaways for her and my dad, or huge birthday parties for us kids. She was a rock star when it came to making extra money at home and saving for a special event.

Always make a list and bring a calculator while shopping

Whether it was buying groceries, furniture or clothes, my mom always had a calculator with her. This was back when we didn’t have price comparison apps or websites. So she did it the old fashioned way, with a weekly circular, a shopping list and a calculator.

If it wasn’t on the list she rarely bought it (only caving when all 4 of us kids teamed up on her) and she bought food by the unit price of each item, instead of the sticker price. That’s how I learned to shop for groceries by unit price, which shows you exactly how much you’re paying per ounce, per liter or per gallon.

Save money by picking your own food

Having a garden was my mom’s pride and joy. We had a relatively large family, so she saved money however she could. She grew fresh corn, tomatoes, beans and all kinds of herbs. We had peach trees, plum trees and walnut trees in our backyard, from which she made fresh cobblers and jams during the summer.

If our garden didn’t grow it, we would pick berries from local berry farms or buy fresh produce from a farmer’s market. I seem to have adapted a lot of her “freshly picked” shopping habits. Now, I prefer to pick my food, or buy it from a local veggie/fruit stand instead of buying it pre-packaged.

Time is more valuable than money

When I turned 12 my mom was diagnosed with breast cancer – she was only 46 years old. While losing her 3 years later taught me many life lessons, the one financial thing it taught me, was that life can change in an instant. Time is so much more valuable than money, and you need have your priorities straight. Family and relationships should come first, then your career, then making money and so on.

To sum it up: be smart with your money, but put the majority of your time and effort into your relationships. Live wisely and be frugal with your finances, but in the end all you’ve got is the wonderful memories and legacy you leave behind. And those are worth more than all the money in the world.

What lessons have you learned from your mother?

Photo Credit: rhett maxwell

How much rent can I afford?

With all the excitement of moving into a new place and getting settled in, we might have a tendency to overlook some important factors. But you can use these simple steps, to help determine how much you can afford to pay.

Calculating a new budget

A good rule of thumb is to spend about 25 – 30% of your monthly take-home pay on housing costs (rent, mortgage, insurance and etc). My current rent is 19% of the net income from my full-time job, which of course, gives me a little wiggle room.

I’m not including my freelance writing or social media gigs, since I’m only starting to get those off the ground. Any extra income I make will go towards traveling and investing my Roth IRA. I don’t want to make the same mistake I’ve made in the past and become house rich and cash poor.

Testing it out

Just to be sure I can actually afford a higher rent payment, I will be “paying myself” an extra $300 for the next 2 months. I’ll be including it within the budget and taking the money out when the rent is due, just like a normal expense. This method has a dual purpose for me:

• I can truly see if affording a higher payment is easy or difficult
• The extra money I’m paying saving, can be used towards incidentals

Speaking of extra costs, there’s lots of other variables to consider when moving to a new place. Below is a list of added expenses to think before moving to a new apartment.

Apartment fees

Apartment fees vary widely, since some rentals are owned by companies and some are owned by individuals. Most landlords will require a security deposit equal to one month’s rent and possibly even a move-in fee to hold the apartment. Many of them even tack on application fees, administration fees and pet fees.

Commuting expense

If you plan to stay in the same general location, there won’t be much of a change in commuting or transportation costs. But if you start thinking of moving further out of the city, you might need to allot for a longer commute, which means higher gas and maintenance costs. On the flip side, if you move closer to your job, you will be saving money each month which provides more cushion within the budget.

Replacement costs

Whether you hire movers, or get friends to help, once you start moving your personal belongings, there’s no guarantee your stuff will arrive in one piece. Plus theirs a much higher chance of damaging the apartment with so much going on, which means you might ruin any chances of getting the security deposit back. So you might have to shell out extra cash to replace broken furniture and fix any damaged areas of the apartment.

Utility changes

Unless you’re downsizing, you’re probably moving to a new bigger and better place, like I am. But along with the extra space comes higher utility bills. Likewise, some rental companies include water/trash in the monthly rent while others do not. There’s additional expense for moving the electricity, TV/cable and internet to the new location which should be included in the budget as well.

Rental insurance

For me rental insurance is a must, and only costs $72 a year to have all my stuff completely protected from fire, floods and theft. Factors that determine the insurance rate include how secure (or not secure) the rental complex is, if the buildings are made out of brick or wood, in what year they were built and so on. The monthly insurance premium might go up or down, once you move to a new place.

Double rent payments

Unless you have perfect timing, your rental payments from one apartment to another will overlap. It’s hard to find a new place, move all your stuff and cancel your old lease right when your new one begins. The added cost could be pretty significant, so try wait for as long as you can, before making the move to the new place.

Special Bonus: Just for being a Careful Cents reader, you can save $10 on your rent by using WilliamPaid online for free. I started using this service 2 months ago, and I got an additional discount from my landlord, for paying with an e-check.

Read more about WilliamPaid and my experience – here.

[Disclosure: if you sign up through my link, you will get $10 and I will get a commission, but it won't cost you anything. This is a special offer just for my readers.]

Photo Credit: Pedro Kwezi

Almost everything I own has been carefully planned and thought about beforehand, to make sure I get the best deal and the best value. Below are the tactics I use to save money on practically anything.

1. Online Deals and Discounts

I do a lot of comparison shopping online to rack up extra savings. You probably enjoy shopping online for that reason too. A few of my favorite online discount resources are Coupon Chief and BeFrugal which offers some pretty sweet savings at my favorite stores.

• Barnes & Noble coupon
• Ulta coupon
• Amazon coupon
• Fossil coupon
• Betsey Johnson coupon

What are some of your favorites stores?

To get the most savings, be sure you sign up for BeFrugal’s free Cash Back and activate your account before you click to use the coupon offers. This way, you’ll earn Cash Back and score your $10 bonus.

2. Negotiating

To me, everything is up for negotiation and it doesn’t always have to be about money. Of course monetary value is important but it’s not the only factor. Sometimes you can negotiate for things that enhance your work experience, free up your time or offer a better lifestyle. Our time can be just as important (if not more) than money.

3. Bartering

The basics of bartering is when you trade goods/services for other goods/services, without exchanging money. I like to barter for lots of things like, offering to babysit for free food (or sweets) and doing bookkeeping for clean laundry. Even if you own a small business you can use bartering as currency instead of actual money.

4. Repurpose and Reuse

I’m not overly obsessed with going green, but I like to do my part when it comes to reusing and repurposing items. There’s no reason to waste perfectly useful stuff. I like to use boxes as make-shift shelves, for my bathroom and kitchen cabinets. I reuse old clothes as cleaning cloths, and old calendars as framed art. Almost anything can be repurposed.

Repurpose boxes as shelves to easily see your items

 5. Get it For Free

Before I even think about buying new furniture, books, household items or even pets, I check to see if I can get it for free. With sites like Craigslist, eBay Classifieds and FreeCycle there’s pretty much no end to what people are willing to give away. Also, check with your family and friends to see if they have any items they are getting rid of.

6. Be a Bargain Hunter

I love thrift stores and consignment shops! I even had a small side business making over $1,000 a month “flipping” thrift store/yard sale finds on eBay. You can find some amazing deals on clothes, home decor and even art, at no where near retail price. Many items will be barely used or even brand new with tags.

7. Avoid Credit Card Interest

Credit cards are tricky but they can be useful financial tools if used properly. Being a reformed credit card-aholic, I rarely use credit cards for everyday purchases. But if you choose to use plastic, for the rewards or points, be sure to pay the balance off every month to avoid costly interest fees.

8. Don’t Impulse Buy

Impulse buys are dangerous, and after our shopping binge, we didn’t even really want all that stuff to begin with. Curb your impulse spending by impulse saving instead. Reward yourself for not giving into impulse buys, with a program like ImpulseSave. I was able to save an extra $535 in 3 months using ImpulseSave, to put towards paying down debt.

9. Time Your Purchase

If you wait to purchase something until you absolutely need it, you’ll likely pay the full sticker price. Instead, do a little planning, and be on the lookout for deals ahead of time. For example, I’m planning to move to a new apartment within the next few months. So, I’m keeping my eyes open right now, for some good deals and sales.

10. Trade-In or Resell

If it’s an electronic, book or even a DVD, it can probably be traded-in for extra cash. Places like GameStop and Best Buy offer money in exchange for items, like smartphones or video games. I live by the “in and out” rule. Nothing new comes in, until something old goes out. Sometimes I resell stuff online or I trade it in for credit towards a new purchase. This helps save money and keeps my house organized at the same time.

What are your tips for saving money?

Photo Credit: laurariumartín

Naturally the next step is to apply for a business credit card, right? Well, maybe not. Credit cards are not the only option. According to data from the National Small Business Association, about 42% of small-business owners carry a credit-card balance. Before you jump on the small business credit card wagon, consider the risks listed below.

The CARD Act doesn’t apply to business cards

Per the 2009 CARD Act, creditors have to disclose their fees and interest hikes. However, they found a (sneaky) loophole around this law. They discovered they could add “business” to their card’s title, giving them free reign to exploit and penalize cardholders, just like they did before such practices were considered illegal.

Unlike personal credit cards…

• Issuers can change account terms at any time
• Penalties and fees are basically unrestricted
• They have higher annual fees

Most cards that are targeted for business or commercial use, often result in hundreds or thousands of dollars in unexpected fees and higher interest rates.

The line of credit can be dangerously high

If you’re new to the business start-up scene, having a high credit limit is very tempting. It can be dangerous to buy the best office equipment and use credit to get your business off the ground. Taking on too much debt without the necessary resources to back it up, is a formula for failure. Instead, choose to grow with your business and avoid the high credit card limits.

You’re personally liable for the business debt

Almost all business credit cards include a personal liability waiver. Which means, once you open the account and start using the card, the issuer can come after your personal assets for the balance, if the account becomes past due. This can include charges made by the owner, business employees and any authorized users of the card.

It could hurt your personal credit history

Since you’re personally liable for business debt, if the account becomes delinquent many lenders will inform the credit bureaus. If your company can’t keep up with the card payments, you might have to dig into your personal savings and assets to keep the account current. Otherwise you risk hurting your personal credit history.

You’re at the card issuers mercy

Why do so many companies use small business cards if they’re so risky? Well, sometimes it’s the only option available. Sadly, it’s much easier to get approved for a small business credit card, than get a loan or find a venture capitalist to invest in your idea. This leaves your business at the mercy of credit card issuers, and that’s never a good idea.

The bottom line is: having access to high credit limits, being at the mercy of the creditors and having no other options is a recipe for disaster. Before applying for a small business card, consider cheaper alternatives and resources for funding your business. Using a credit card can be unwise because you’re promising future income to pay current expenses. Enter into this decision with caution, the risks may out weigh the rewards.

Photo Credit: WI-LO