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How wise is it to get a second small business credit card?

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Your Business Credit
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Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

Ask Elaine a question or read her prior answers in the 'Your Business Credit' archive.

Question for the CreditCards.com expert Dear Your Business Credit,
I am thinking of doing a balance transfer to get a lower interest rate on the balance of my business credit card. How easy is it to get a second business card? And if I do open one, could that make it look like I'm overextended and hurt my credit score in the future?
-- Entrepreneur

Answer for the CreditCards.com expert Dear Entrepreneur,
This is a case where that cliche, "Look before you leap," truly applies.

It's not all that hard to get a second business credit card if you have a terrific credit score. "If you're signing personally for it and you have really good credit, it's not going to be difficult at all," says Tracy A. Becker, who advises businesses and individuals on credit issues as president of North Shore Advisory Inc. in Tarrytown, N.Y. "You could probably get four."

If your credit score is poor -- whether it's your personal score or your business score with Dun & Bradstreet, Experian Business Credit or Equifax -- it could be hard to get another card, says Becker. Sometimes, a single late payment on a trade line can have a big impact on your business's credit rating. "If you're late on your largest line of credit, even if it's a small line, your score could plummet," Becker says.

But whether you have sterling credit or need to repair it, trying to get a second card may not be a good move.

If your personal credit score is 740 or above, you will generally qualify for some of the best interest rates, says Becker. Getting a second line of credit could hurt that score.

"You really have to be very careful when opening credit to look at your goals," says Becker.

There are other reasons to do your homework. It's typically easier to get a great interest rate on a personal credit card than on a business one, according to Sankar Krishnan, senior vice president of banking and financial services at Sutherland Global Services in New York.

That said, credit cards shouldn't be your first line of attack. Rather than try to hunt down a new business card, Krishnan says, "I would rather first find a bank or financial institution that is willing to bank me." You'll be better off if you can get a lower interest line of credit from a bank and use it to pay down your credit card balance.

Although the credit climate has been tight, don't let that discourage you. "The fact that you have a business card is going to help you find a bank that will make you a loan," says Krishnan.

See related: Creative financing for small businesses, How businesses can start on the road to credit, Should you fund your startup business with a credit card?

Elaine Pofeldt is a journalist who specializes in entrepreneurship and careers, contributing to publications such as Fortune, Money, Working Mother and many others. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals.

Elaine answers a question about small business and credit from a CreditCards.com reader each week. Send your question to Your Business Credit.

Published: March 25, 2013



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Credit Card Rate Report

Updated: 12-18-2014

National Average 14.92%
Low Interest 10.37%
Balance Transfer 12.73%
Business 12.85%
Student 13.14%
Reward 14.90%
Cash Back 14.94%
Airline 15.52%
Bad Credit 22.73%
Instant Approval 23.33%

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