How wise is it to get a second small business credit card?
Ask a question.
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?
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.
Meet CreditCards.com's reader Q&A experts
Does a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Is your business ready to go cashless? Read this first – If your business is considering going cashless, consider the pros and cons first. Start by knowing your customer base - and learn from experiences of other businesses who've tried to go cashless with mixed results ...
- Your company-issued card was canceled? Here's how to protect your credit – If you had a business credit card issued by your employer that was suddenly canceled, there are steps you can take to make sure it doesn't hurt your credit. Here's what to do ...
- How to grow your business in the new year using business credit cards – Considering expanding your business in 2019? Business credit cards can help. Here's how to maximize sign-up bonuses, flexible credit limits and payment options, and rewards ...