The Art of Moving Money
Essentially, a balance transfer is nothing more than moving money from one account to another. If, for example, you obtain a new unsecured line of credit or a new business credit card with a low introductory rate, then you might decide to transfer your existing credit balance in order to avoid the higher interest rate attached to another account. A no-brainer, right?
Not so fast.
Properly researched and carefully executed, a balance transfer can be a powerful debt-reduction tool, however, it can also create unforeseen problems and consequences for your business. The long-term outcome of a balance transfer ultimately depends on a few factors you must keep in mind any time you consider moving money between accounts.
What’s This Really Going to Cost?
Figure out exactly what a balance transfer is going to cost and compare multiple offers. Basically, you are looking for the lowest interest rates sustained over the longest period with the lowest associated fees.
For instance, a $10,000 balance transfer to a new account with 0% APR for 3 months and 3% balance transfer fee will run you $300 over a 12-week period, the equivalent of 12% annual APR. That’s not a very good deal, all things considered. Always make sure to read the fine print and seek out options that provide a good balance between low rates and longer-term windows.
Next, you need to take a look at your business credit score. Seven or eight years ago, a lizard with a business plan could have obtained a credit card, but in the wake of the financial crisis financial, institutions have been tightening restrictions.
In order to get the best balance transfer terms, you must build up your credit score. Payment history alone can count for more than a third of your overall score, so the best thing to boost your rating is timely repayment of debt. You can also give yourself a leg up by actively monitoring your credit scores and ratings with easy-to-use online tools from Dun & Bradstreet