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Bear in mind that although card issuers express interest as an annual percentage rate, your credit card interest is still calculated on a monthly basis. Even if your annual rate goes up, it may not necessarily stay that way for a continual, 12-month period. It could still go up on a month-to-month basis depending on the terms and conditions of your particular credit card.

When Credit Card Companies Can Change Interest Rates

The federal regulations, which passed in 2009 and were implemented in 2010, make it clear that banks can raise interest rates at any time as long as they follow certain rules. In a summary of the regulations published by the New York City Department of Consumer Affairs, they point out that banks cannot raise interest rates on future purchases within the first year of issuing the card.

After that, they can raise them as they see fit as long as they give 45 days’ written notice to each affected cardholder.

There are exceptions to this rule including variable-rate cards, which fluctuate according to the Prime Rate, consumers who incur the penalty rate because of late or missed payments, or the expiration of an introductory rate. In all three cases, a bank can arbitrarily raise the interest rate without any further notice. The terms and conditions of such increases should be clearly spelled out in the disclosure paperwork provided with the credit card application.

Changing the Rates for Purchases You Made Last Year

Changing rates on past purchases is one of the practices that provided impetus for the new credit card regulations a few years ago. Prior to the legislation banks were able to do that legally.

Whenever an interest rate was raised, the new rate was applied to the current balance from that point forward, regardless of how much of that balance was incurred in the past. That is no longer acceptable under the law. If you were initially charged 15% on a vacation you took six months ago, your interest rate on those charges will not go up.

You might also be pleased to find that the new rules require banks to apply your monthly payments to the highest rate transactions first. In other words, if you were charged 15% for last year’s vacation but your current rate is now 17%; monthly payments you make are supposed to be first applied to all transactions at the 17% rate. Once those are paid off, funds can then be redirected to the 15% transactions. Prior to the changes, most banks did things just the opposite.

Paying Off Credit Cards with Changing Rates

The reality of credit cards is that banks make their money by charging interest. They also have set up a system whereby consumers who pay just the minimum monthly payment will end up paying significant amounts of interest and could potentially take years to pay off balances. To help educate consumers, the 2009 regulations made it a requirement for banks to print payoff information on every credit card statement.

On the Federal Reserve website, there is an example of how this information should look on a typical credit card statement. The example assumes a $3,000 balance with an APR of 14.4%.

Paying just the minimum monthly payment would result in more than $1,700 in interest and a period of 11 years to bring the balance to zero.

By increasing the monthly payment by $13, a consumer would pay just over $700 in interest and would have the debt settled in three years.

It is conceivable that consumers who pay just the minimum amount every month and are subject to annual rate increases could find themselves in the position of never fully paying off their credit cards. That’s why it’s extremely important to be careful how we use credit cards. Treating them as an unlimited supply of cash is perhaps the fastest and easiest way to get ourselves in way over our heads.

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- McKinley Hildebrand

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The recent economic recession and global banking crisis have forced banks and other credit card issuers to dramatically revise their credit policies in the last few years. Competitive fixed interest rate credit cards have all but disappeared, to be replaced by variable rate cards. These new credit cards may feature low attractive rates to start, but can and will go up in the near future.

Rates Subject to Change

If you do have a credit card or two in your wallet with attractive APRs, don’t get too comfortable with them because they’re going to change!

Most all consumer credit card accounts now feature variable interest rates based on a banking index rate such as the U.S. bank prime lending rate, currently at 3.25%.

For most consumers, this means that once each year your bank or credit card company will review your credit card account and set your interest rate for the next 12-month period, per the terms of your credit card agreement. This involves adding a margin or mark-up of 8 to 10 points to the raw index value.

For example, let’s say that your bank is currently charging you 11.99% APR on your unpaid credit card balance each month. If by 2013 the prime rate increases to 4.50% and your credit card margin is 8.74%, when your rate changes your new APR will be 13.24% for the next full year.

Interest Rates Matter

No matter what sort of premiums and rewards your credit card offers, if you maintain a revolving balance on your card you will pay a significant amount of interest over time. Average credit card interest rates for March 2012 are at 16.87%!

Consumers with traditional non-rewards credit cards are paying an average of 15.03% on their outstanding balances, while the average APR for rewards cards is a whopping 17.66%! Small changes in interest rates can mean big payouts for cardholders over a period.

The Federal Trade Commission, in the interest of protecting American consumers, publishes many helpful facts and tips regarding credit card usage. The FTC website, includes a handy credit card repayment calculator.

Plug in the credit card balance and interest rate and the FTC tool will calculate the amount of time necessary to pay off the debt if you are only making minimum monthly payments of 5%. A balance of $3,000, at the current average rate of 16.87%, will take 7 years to pay off!

This includes $1111 in interest payments and assumes no new charges will be made! If your credit card rate interest rate were just two percentage points lower, 14.87%, the total amount of interest payments would decrease to $937, a savings of $174!

To pay this balance sooner, say in three years, you would need to increase your monthly payments to $107 per month. At 16.87%, you would still be paying a total of $844 over the 36-month term. This example also assumes that your interest rate won’t increase again!

Premiums and Rewards Can Make a Difference

Factor in cash back premiums and other credit card rewards and you will be saving money over time if you use your credit cards wisely. But as we’ve seen, the average interest rate for rewards cards is almost a full percentage point, .79%, higher than non-rewards cards. This fact alone should encourage consumers to pay off their credit card balances each month, when possible.

In fact, according to research conducting by PBS, the Public Broadcasting System, 38% of Americans do indeed pay off their credit card balances each month. However, 24% of cardholders make only minimum monthly payments.

The Frontline report, concludes that the other half of American credit cardholders fall somewhere in between. It’s easy to draw conclusions when looking at the PBS study.

It pays to shop for the lowest interest rates when looking for a new credit card. Managing your cards well and not letting balances get out of hand will pay huge dividends over time.

It’s also important to remember that the savings gained by a two, three or even five percent cash back reward on credit card purchases can quickly be lost when your bank is charging you 16% or 17% interest on those same purchases each month.

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Check out the rates available now using our FREE credit card chaser to compare dozens of credit cards!

Dropping your current credit card may only be needed as a last resort. You can first try out a rate-reduction strategy with your existing credit card using some guidelines offered by U.S. News.

How to Get a Rate Reduction

Asking your credit card issuer for a rate reduction can be the first step in possibly obtaining one.

Don’t be put off if your first request is met with a rapid no, as you may need to talk to someone other than the person who answers the phone.

Ask to speak with a manager or other executive to pose your question, and come armed with a number of reasons you believe you deserve one. A good credit history, high credit score, and long loyalty to the company are valid reasons for a rate reduction, as is noting other credit cards that have rates lower than yours and offer similar benefits.

How Much of a Reduction to Ask For

Being greedy or unrealistic with a rate reduction request can nip it in the bud, warns U.S. News. Don’t go into the discussion with your guns blazing and your rate set on a ridiculous amount that even the competitors are not offering. You may even want to refrain from mentioning a number at all and instead simply ask what kind of reduction can the company offer, if any.

If you do have to name a number, keep in mind that most credit card companies will probably not reduce your rate by more than a point or two. Although the reduction can seem small at a glance, put it in perspective in the big picture. Even one or two points may be able to save you substantial amounts of money over the long haul, especially if you use the card frequently and just as frequently carry a balance due.

Another number to pick is one that the credit card’s competitor is offering for a credit card with similar benefits. Similar is a key word, as you may find other card with drastically lower rates that don’t offer the same protections, credit limit, or other perks you are enjoying with your current card. Ask your current credit card company if it can match or beat a sweet deal on a card you found that has all the same benefits without the same high rates.

You may also have to be prepared to bail, however, if you threaten to leave your current credit card company unless it lowers your rate and it refuses a reduction. Don’t threaten with actions unless you are truly prepared to follow through.

Don’t Buy into Promises of Reduced Rates

Companies that call or contact you with the promise of reducing your credit card rates may simply be a scam, warns the Federal Trade Commission. The first sign of such a scam is if the company wants a fee up front to negotiate with your credit card company in your favor. You may never see that money again and never see any results.

Many of the scams have come in the form of robocalls, or recorded messages left on voice mails. They typically say they have an insider relationship with credit card companies and can reduce your rates, among other things.

Other promises from such scams have included giving you the ability to pay off your credit card bills up to five times faster than you would without their help or even a money-back guarantee if their services do not work.

Even when the services fail, the FTC reports many who have succumbed to such offers never see a dime in return.

If the companies are legitimately trying to help you, be aware that they are not likely to have an insider relationship with credit card companies and would not be doing anything special to help you. They would probably be following the same procedures you can do free, including asking for a reduction and being persistent in your efforts.

Check out competitive rates to compare to your existing credit card or go for a new credit card altogether with our FREE credit card finder!

Alternatively, you can stop using credit cards that make unfair rate increases and look for a new credit card from issuers who have a good track record of treating customers fairly.

Let the FREE credit card chaser find you offers on for credit cards from fair companies now!

Credit card companies often entice new customers with amazing introductory offers of low to no APR for a period. However, as a consumer it is important to look beyond the introductory rates and examine the standard APR a credit card charges its customers after that period. This is the realistic rate and the one to be compared when choosing a new card.

You Can Predict Some Credit Card Rate Increases

If you have problems following some of the rules set forth by the credit card issuer, you will face credit card rate increases. Two of the penalty rates most commonly faced by credit cardholders are the over the limit penalty rate and the late payment penalty rate. Essentially what happens is that when the cardholder exceeds his spending limit or misses the payment due date, a new higher penalty rate is triggered.

While penalty credit card rates are sometimes temporary, often they are permanent. It is important to know what the policy of your credit card issuer is when it comes to penalty rates. Don’t assume that it is temporary, only to learn later that it is indeed your new permanent rate.

If you have been charged penalty rate increases, you can call the lender and ask for leniency, explaining any extenuating circumstances. This is the type of credit card rate increase where you can have the most success getting it overturned, especially if you have a good credit score and a solid payment history. A penalty rate triggered by a one-time slip-up can often be forgiven if you take the time to contact the lender. However, essentially the decision and the power over the rate is in the hands of the lender.

Your Power in Regards to Unfair Credit Card Rate Increases

As a consumer, it is indeed your right and within your ultimate power, to decide whether to do business with a particular credit card issuer. Even if they have issued your oldest credit card and you want to keep it open to safeguard your credit score, you can pay off the card and get a new one with much more reasonable rates. If you are not using the credit card with the unfair rates, the company cannot make any money from you.

Consumer choices speak powerfully to businesses and credit card issuers are businesses. If more consumers take charge of their credit use and avoid issuers who treat them unfairly and favor ones that do, issuers will ultimately have no choice but to change their ways.

Avoid Unfair Credit Card Rate Increases

You can indeed avoid unfair credit card rate increases in many situations. Essentially, you need to know exactly what your credit card’s terms and conditions say. If you understand this fine print, you will know exactly what will cause penalty rates to kick in. Penalty rates are often perceived as the unfair rate increases, when in reality, it is clearly spelled out for you, so you can avoid such rates.

Primarily, as long as you keep good credit card management skills, you should be able to avoid such increases. You can find such information on how to do so quickly and easily through online resources such as MyMoney.gov. This means always making timely payments, never going over your limit and monitoring your credit score.

Your credit score is affected by a variety of factors. These include how much available credit you have, your debt to income ratio, your payment history and more.

Find out about your credit score by getting a free yearly report from one of the major credit reporting bureaus: Experian, TransUnion, or Equifax.

If you cannot avoid unfair credit card rates, the obvious solution is to find a better credit card to suit you, your spending habits, and your credit rating.

Get a personalized credit card offer now by letting the FREE credit card finder find the ideal new credit card for you!

Often, these “updates” to your credit card’s terms indicate ways your card issuer can charge you more money. In other words, if you aren’t aware of these changes, you could unknowingly rack up additional fees, or even damage your credit.

Look out for these common ploys:

1. Your Due Date Changes

Your credit card company can change your due date at its discretion, as long as your are notified in advance. But if you don’t read the notification, you might not realize the change. Missing a payment by even just one day can cause you to incur heavy late fees, and could increase your interest rate or void a promotional APR.

If you do notice a change and your bill is paid automatically through your online banking service, make sure to update the “pay by” section on your account to reflect the new due date.

2. Your Interest Rate Increases

Credit card companies can adjust your interest rate at their discretion, and in some instances, the interest rate can go as high as 30%. If you read about an upcoming rate hike that is significant, consider carefully before canceling the card. If you take this route, your minimum monthly credit card payment could increase. Plus, closing a credit card could hurt your credit score, especially if it’s one with a high spending limit.

3. Fees Increase

Expect most of your banking and credit card fees to increase – if they haven’t already – as banks struggle to maintain profits in light of the CARD Act. Fees subject to increase include annual fees, cash advance fees, late fees, paper statement fees, and replacement card fees. Though you may assume that fee hikes would be minimal, this isn’t necessarily the case.

What You Can Do

If you notice an upcoming rate hike but can’t pay off your balance in full, consider transferring the balance to one of the low APR credit cards with a more attractive rates. If your credit is decent, you should be eligible for one with an introductory 0% APR for anywhere between 6 and 21 months.

Just be sure to fully review the terms of the agreement: Understand what the APR will adjust to once the promotional period ends, and how much the balance transfer fee is. Alternatively, and after careful consideration, you could close the account before the rate increase takes effect and continue to pay off your balance at the original interest rate.

To avoid paying excessive fees, make on-time payments a priority and switch to paperless billing. If an issuer tries to slap an annual fee on you, call customer service to see if you can get it waived – it never hurts to ask. Credit card issuers are now banned from charging an over-the-limit fee, unless you provide your written consent. In other words, thoroughly review all documents before you sign. And don’t sign anything you don’t feel good about.

Final Thoughts

One way to minimize the effect of rate hikes and fee increases is to simply commit to getting and staying out of credit card debt. All it takes is a little sacrifice, some common sense, and a careful reassessment of your spending habits.

The three golden rules to eliminate credit card debt are to spend less than you make, to create and stick to a budget, and to eliminate unnecessary purchases. Let the banks fend for themselves when it comes to staying profitable. You’ve got better things to do with your money!

Have you had an interest rate hike in the past? What did you do about it?

Author Bio: David Bakke discusses smart money management and responsible credit card use on Money Crashers Personal Finance. Additionally, he enjoys playing with his young son, eating good food, and reselling electronics online.

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Credit card rate offers are primarily based on the Annual Percentage Rate, or APR. They are often marketed to new consumers with 0% or extremely low percentage rates, called introductory offers. But, they only last for a short time and after the end date, the true APR is revealed.

Depending upon your credit score, you may see a significant increase. You can stay current with your credit history by logging onto AnnualCreditReport.com. Within a few seconds, you’ll have your credit report. Take this opportunity to study the information closely. Keep it handy and monitor your spending.

After your introductory APR expires, you should receive a comparable rate. While there are some customers who will qualify for APR rates as low as 9% to 13%, the average APR in the United States is between 14.50% and 21.99%.

Top Credit Card Offers Worth Considering

Some of the top credit card offers come from Discover Card; the interest rates are very low and they have great rewards. Depending upon your needs, this credit card company offers various cards with a number of benefits.

For example, the Discover More Card comes with an 18-month introductory balance transfer rate of 0%. The overall APR is 0% for the first six months and they guarantee cash back rewards up to 5 %.

The Discover Motiva credit card has a 0% APR and balance transfer for 15 months, with as much as 20% cash back.

Chase Freedom credit card is also a top choice because of the cash back bonus of $100 combined with an introductory APR of 0%. For six months, all purchases are charged 0% interest and balance transfers have 12 months at 0%. Neither the Chase Freedom, Discover More nor Motiva credit cards have annual fees.

A top pick for long-term low interest credit cards is the Simmons First Visa Platinum card. This card offers a variable APR of 7.25% and a balance transfer 7.25%. The major positive aspect of this credit card is the stable APR percentage. The consistent interest rate helps manage finances easier.

Additional Interest Rates Associated With Credit Card Offers

There are other interest rates associated with credit card offers and they can affect your rate as well as the APR. The finance charge is one such type. There are a few ways credit card companies calculate finance charges.

Some use an adjusted balance; this method considers your beginning balance and applies current payments accordingly. The other method uses your previous balance, which can have higher finance charges attached. Ask about minimum finance charges too.

Balance transfers and ATM cash advances have different APR percentages. Each transaction is recognized by the APR percentage associated with the task and added to your overall minimum balance due. On average, balance transfer APRs are approximately, 16%; cash advances are usually over 20%, in addition to the fees charged by the bank.

Credit Card Ratings

When comparing credit card rate offers, it is also important to review their consumer ratings. You should know how they treat their current customers in all areas that can affect your experience. This includes how they reply to inquiries concerning, billing, payments, rewards and benefits. Each of these factors should influence your decision.

One of the top credit card rating companies, is JD Power. They have a detailed list of credit card companies and the most current satisfaction study for review. This is an excellent way to see how their customer’s rate their services, both individually and overall.

You always want to compare credit card rate offers from reputable companies. After researching for a while, you will discover only a few top credit card companies that fit your requirements and expectations. This will help narrow your choices.

Although your choices will be fewer in numbers, you may still have some challenges to face. The simplest way may be for you to write down what you want from the credit card companies on your list and match their offers to your requirements.

If you have the mindset that you are shopping for a value rather than accepting an offer, your choice may lead you to the perfect credit card with the most comparable rate available.

Realistically, the choice is personal and shouldn’t be rushed. Choosing a credit card offer wisely may take a few hours or days, but the result must be positive as well as beneficial for you.

Take a second to research credit cards with the FREE credit card chaser and find the lowest credit card rates today!

If you are a balance transfer novice or just don’t have the time to read all the fine print, click on the FREE credit card finder and learn more about credit card offers!

Most credit card companies offer an introductory low interest rate that applies solely towards the balance transfer. Such rates come with stringent terms and conditions. According to CNN Money, it only makes sense to do the balance transfer if you are able to pay off the total amount within the period of the promotion.

Understanding Balance Transfers on Credit Cards

As the term states, when you do a balance transfer, you move an unpaid amount or debt from one credit card to another. For a credit card balance transfer to be financially viable, the new credit card usually must offer a much lower teaser interest rate as an introductory enticement. Sometimes, this rate can be as low as zero percent APR.

The lack of financial charges per month, if you have zero percent interest rate, is a huge help in paying off your credit card balance.

But it is important to remember that most credit card balance transfers have associated fees that can be as much as 6% of the total amount. So that has to be factored into the total cost of the balance transfer.

Balance Transfer Credit Cards: A Smart Choice?

The CARD Act of 2009 mandates that any credit card company that offers ‘teaser’ interest rates to attract new customers cannot change that interest rate for a minimum of six months. Also, it requires the credit card company to be transparent in all its terms and conditions.

In other words, your monthly statement must show how long you have to pay off your balance, how much your monthly payment amount will be, and how much penalty you would have to pay if you missed a payment or could not pay off your balance within the stipulated time. With these safeguards in place, this is a great time to get the best credit card rates for balance transfers.

However, it is important to remember that if you are unable to make any payment for more than 60 days, then your introductory low interest rate is likely to disappear and be replaced by a much higher interest rate as declared in your credit card agreement.

Additionally, you must understand how you are bound by time limits for paying off your transferred balance. In other words, some credit card companies require you to pay off the entire amount within the promotion period. If you are unable to do so, you will have to pay interest at a higher rate on the entire amount.

Financial experts ask all consumers interested in saving money by moving their balance from a high interest credit card to a new credit card offering low introductory interest rate, to make sure that they are able to meet their payment commitments.

It is also important to factor in the cost of balance transfer fees. Sometimes, depending on the balance amount to be transferred, the fee may be too high to make any substantial dent in your debt.

Low Interest Balance Transfer Credit Cards: Easy To Qualify?

There is no single determinant for getting a low interest rate credit card that applies towards balance transfers. One of the most important factors is your credit rating, your FICO scores that determine your ability to pay off your loans on time.

Sometimes the best credit card offers are made to new customers only, which will exclude you if you are a customer of the financial institution. You might qualify for the credit card offer but crunch all the numbers, factor in the worse case scenario, and then make an informed decision before signing up.

The Search is On: Getting the Right Credit Card

The path to debt reduction is littered with unexpected hurdles and tough decisions. But do your due diligence, read all the little text in the credit card agreement, ask the financial institution for clarifications, and exercise control on your spending. You will be surprised at how quickly that omnipresent shadow of debt will start to shrink.

Additionally, once you set yourself on that path of financial redemption, it is important to get all the help you can find.

Turn to the FREE credit card finder and look through select credit cards with the best balance transfer credit cards for you and watch your financial bogeyman melt away!

Use the FREE credit card finder to select the best credit card rates for students and step into the adult word of money management!

Credit card companies offer specially designed credit cards for students, most of who have minimal or zero credit history. Given the lack of FICO scores, most financial institutions that provide credit cards to students hedge their gamble by applying high interest rates, low credit limits, and stringent terms and conditions.

Student Credit Cards: Freedom or Future Debt

Student credit cards are a valuable financial instrument. If you are paying off your student credit card balance in full and on time, not only are you getting the cheapest loan in the market but you are also building up your credit history.

Demonstrating such financial responsibility will help you in several situations after graduation, from passing background checks for renting property to getting low insurance rates.

According to a 2009 Sallie Mae study cited in U.S. News and World Report, spiraling debt has become an increasing problem for college students. The report found that 20% of seniors carry more than $7,000 in debt. So use your student credit card carefully since it has strict terms and conditions, besides higher-than-usual credit card interest rates.

Financial gurus have the following advice for college students using credit cards. Most importantly, make sure you read the fine print and know all the details of your student credit card agreement. For instance, some student credit card companies will close your account if you miss one credit card payment, doing substantial damage to your credit history.

Student credit cards have higher interest rates and should carry zero balance. In other words, use the card carefully and pay off all your balance on time. Keep your credit limit low. A $500 limit should suffice.

Understand the terms and conditions of your rewards program. Don’t hesitate to ask questions about how points can be redeemed, terms of expiration, among others.

Make sure you understand all the different fees levied by your student credit card company. From cash withdrawal charges, late fees, bounced check fees, to monthly maintenance fees, every credit card company has a different structure.

Make sure that your credit card company is reporting all your transaction to the three credit rating agencies. This is very important since you are building your credit history by using the student credit card.

The Signs: A Good Student Credit Card

With the credit card market teeming with multiple seemingly attractive student credit card offers, it is very important for students to understand what good terms and conditions mean, what sort of benefits they are seeking, and what rewards programs work for them.

Some of the important markers of a good student credit card are:

• No annual fee
• An attractive introductory APR that lasts more than a year. Under the CARD Act of 2009, a teaser introductory APR has to remain fixed for a minimum term of six months. Be aware that if you miss making your payments for more than 60 days, your APR will automatically jump to a higher punitive rate, as stated in your agreement.
• Reasonable APR after the teaser term has expired
• Monthly reporting to the three credit rating agencies
• Automatic payment reminders to avoid late fees and interest charges
• A good rewards structure with options such as discounts on purchases at your bookstore etc.

Protecting the Young: The Legal Barriers

The CARD Act of 2009 sets down stringent rules for credit card companies that impacted how they dealt with student consumers.

Students had to be qualified for credit cards. In other words, they had to show minimum income or savings that indicates the ability to pay their monthly balance. If they do not qualify, students needed a co-signor, who would be responsible for any outstanding debt.

Credit card companies can no longer market their offers using promotional gifts, coupons, or services, on the grounds of colleges and universities.

Additionally, academic institutions and their alumni associations have to declare dealings with credit card companies that result in marketing agreements.

With such protections in place, students are less likely to fall prey to unfair business practices of credit card companies. Yet student credit cards are here to stay and if properly used can help ease financial strain of those penurious college years.

Use the FREE credit card finder and get a credit card that is smart and cool!

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These rates are markedly lower than consumer credit cards which are currently at an average of 16.87% overall. Rewards cardholders are paying an average of 17.66% on their outstanding balances while non-rewards consumer credit cards carry an average rate of 15.03%.

Qualifying by the Numbers

Qualifying for a business credit card involves much the same process as qualifying for an individual card. Business owners apply for credit cards as individuals and undergo the same scrutiny. To be eligible for the best business credit card rates, business owners should have excellent credit.

Using the FICO credit score guidelines, a score of 740 and above indicates excellent credit. Average scores of 700 to 720 are very good and averages in the 680 to 700 range are considered good FICO scores.

Credit scores of 640 and above are generally considered to be okay and depending on the lender, may be acceptable for a good business credit card rate.

Credit reports should be free of any recent late payments or other credit blemishes such as judgments or liens. Qualifying guidelines also include a review of how much outstanding credit a business applicant might have, as well as a review of the number and kinds of recent credit inquiries found on credit bureau reports.

In addition, proof is required to show that business applicants have sufficient income to repay their outstanding credit obligations. Business owners may be required to submit copies of recent tax returns and/or financial statements to their bank, in order to complete the qualifying process.

Reasons to Apply for a Business Credit Card

According to the U.S. Small Business Administration, more than 65% of small businesses regularly use credit cards, but fewer than half have credit cards in their business names.

There are a number of solid reasons for a business owner to apply for a business or company credit card. First, IRS tax regulations require that business owners keep separate records of business expenses. Records must contain the details of each business expense and be divided into appropriate tax categories.

Most business credit cards do the record keeping for you and provide permanent records of all your business expenditures. Business credit cards also help small corporations separate personal transactions from business transactions, preventing the comingling of funds and sustaining the corporate shield of protection.

Lastly, applying for a business credit card helps to establish the creditworthiness of the company as well as the individual(s) applying for the card. You not only build a credit history for the business, but also avoid having business debts appear on your personal credit report.

Pros and Cons of Business Credit Cards

The financial website Investopedia, lists a number of things to consider before applying for a business credit card.

There are several financing alternatives open for small businesses. These include traditional loans and lines of credit. Loans and credit lines take time to arrange and often require some form of collateral or security. On the plus side, these alternatives feature lower fixed interest rates, fixed payments, and longer payback periods than credit cards.

Advantages to choosing a business credit card over another form of financing for your business include, convenience, easier qualification, the ease of on-line transactions, record keeping assistance and the rewards and other incentives available with business credit cards.

Business credit cards also help to quickly build a credit history. They also provide ready access to cash when needed, to cover shortfalls in cash flow and for other immediate needs and expenses.

The negatives of credit cards include the fact that they are more expensive than other types of financing, with variable interest rates currently in the 14% to 17% range.

Account signers are personally responsible for outstanding balances, which is a negative feature. Credit cards are also less secure than other financing tools and could be misused by employees.

Reasons to be Careful with Business Credit Cards

While we’ve explored a number of reasons that business owners should apply for lower rate business credit cards, there are a number of differences in business cards that should be reviewed before any credit card applications are completed.

Unlike individual credit cards, banks that issue business credit cards can change interest rates without warning. Banks are also not limited to annual interest rate changes on business credit cards.

Business cardholders have less time to pay their bills and there is no limit on late fees and over-the-limit fees that banks may charge.

Check out credit card offers for your business with the FREE credit card chaser!

Avoid high interest rates by shopping for a new credit card with the FREE credit card chaser!

Make sure that you cancel the credit card accounts you no longer use. Having outstanding credit lines, that you aren’t using, can negatively impact your credit standing. Your credit score is not only dependent on making your payments on time, but on how much available credit you have in relation to your income. Having too much credit is as bad as having too little!

Credit Card Laws Protect Consumers

When applying for a new credit card, make sure you read the fine print on the credit card agreement. Changes implemented since the passage of the Credit Card Act of 2009 have eliminated many unfair lending practices in regards to credit cards, but consumers should still be aware of all the terms and conditions before they accept a credit card and begin to use it.

Agreements from credit card issuers must advise consumers of penalty interest rates for cardholders who fall behind on their credit obligations.

For most banks, these rates top out at nearly 30%! Late fees, over limit fees and other bank charges must also be clearly detailed on card agreements. Many of these fees have also been limited by the Credit Card Act.

Hold Your Bank to their End of the Bargain

According to the Credit Card Act, your bank can only change your credit card interest rate after providing you with a minimum of 45 days notice, in writing. If you think the change is unreasonable or unfair, you have the right to say no! You may then close your account and pay off the balance under the original terms of your credit card agreement.

If your credit card interest rates get out of hand, you may also negotiate with your credit card company for a lower rate. To keep you as a customer and help you manage high balance accounts, banks are often willing to eliminate fees, reduce required minimum payments, or slash interest rates.

Since suffering devastating losses in the closing years of the 2000s, banks have become far more flexible in dealing with consumers’ credit card issues. New laws have certainly helped, but your bank would much rather work with you than have you default on an outstanding credit card balance.

Pay Off Your Cards Each Month

Handy credit card payment calculators like the one featured on the Federal Trade Commission website, can help you formulate a plan to pay off your outstanding credit card balances.

Currently, the average consumer credit card interest rate nationwide is 16.87%! At this rate, it would take about six years to pay off a balance of $2000, making only minimum 5% payments each month! The interest charges alone would amount to $720!

Paying off the same $2,000 balance in just two years would require monthly payments of $99 and cut the total interest cost almost in half, to $371! Just over 38% of Americans manage to pay off their credit card balances in full each month according to a study released by the Public Broadcasting System.

This same study revealed that 24% of Americans manage only minimum payments on their credit card obligations each month. Using our previous example, but elevating the APR to a penalty rate of 30%, it would take 9 full years to pay off a $2000 credit card balance and cost an additional $1822 in interest charges. This would almost double the original debt!

No Interest Is Good Interest

Using a debit card or a prepaid Visa or MasterCard is another way for consumers to manage their finances, save money and remain debt free. Prepaid Visa, MasterCard, American Express, or Discover logo cards carry all the benefits of regular interest bearing credit cards with little or none of the expense.

Many families find prepaid credit cards a helpful alternative to traditional interest bearing cards.

Younger members of the household can be entrusted with cards that feature set spending limits, helping them to learn to use credit wisely, while at the same time avoiding costly interest charges.

As checkbooks have mostly disappeared from the American scene, they have been replaced by Visa and MasterCard logo debit cards. Most debit cards provide ready access to cash and other services while charging only nominal fees.

The one drawback to debit cards, of course, is that users are limited to their cash on hand. In many cases however, overdraft protection can be added to an account or a line of credit may also be attached to a debit bank account.

Look for the best deals on a credit card with the FREE credit card finder above!