Expert Q&A

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


If you’re thinking of transferring the balance on your small business card to one with a lower interest rate, there may be better options than getting a second card

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Question for the 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 expertDear 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?



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