Launching a business often involves acquiring funding, which can come from personal savings, angel investors, or loans. However, these options may not always be readily available, leaving businesses reliant on lenders such as banks and government programs.
To assess a business’s creditworthiness and determine its suitability for a line of credit, lenders review the company’s credit profile. This assessment considers factors like payment history, credit usage, credit mix, and other financial indicators that reflect the business’s financial responsibility.
Establishing Business Credit: The Foundation for Growth
Building business credit is crucial for new businesses as it allows them to access financing, secure favorable terms on contracts, and establish a strong financial reputation. Here’s a step-by-step guide to establishing business credit:
Incorporate Your Business: Business credit is separate from personal credit, so incorporating your business as an LLC, C or S corporation, or LLP is essential for building a distinct credit profile.
Obtain an Employer Identification Number (EIN): An EIN serves as the IRS’s reference for tracking a company’s tax filings and is required for businesses with employees. Sole proprietorships are not mandated to have an EIN, but it’s recommended to protect personal credit from business liabilities.
Explore Supplier Credit: Supplier credit involves extending payment terms for purchases, allowing businesses to access supplies and pay for them later. This option is particularly beneficial for startups with limited cash flow.
Leverage Vendor Credit: Vendor credit provides essential services or products on short-term financing terms, typically with minimal requirements. Net 30 accounts, where payment is due within 30 days, are a common form of vendor credit.
Utilize Service Credit: Consistent and timely payments for services like internet, web hosting, cable, power, and cellphone airtime can also contribute to building business credit. These deferred payment contracts demonstrate a business’s commitment to financial obligations.
Consider Retail Credit Cards: Retail credit cards are often easier to obtain than traditional business credit cards and may offer rewards like cashback, points, and discounts. These cards are typically limited to a single store or a major retailer’s network.
Apply for Business Credit Cards: Business credit cards provide access to revolving credit, allowing businesses to charge company expenses and steadily build their credit profile. These cards can be used for various expenses, including licenses, insurance, taxes, utilities, payroll, supplies, and marketing.
The Path to Success: Building Credit Over Time
Establishing business credit takes time, especially for startups. However, by utilizing financial tools like supplier credit, retail credit, and business credit cards, businesses can cultivate a strong credit profile and pave the way for future growth and success.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
Regularly making timely payments and keeping your account balances low are a couple of ways to use a credit card to build credit.
Your credit card habits can both positively and negatively affect your overall credit health. Responsibly using your card and making timely payments will steadily improve your credit—while the opposite habits will reduce your standing over time.
Here, we’ll discuss how to use a credit card to build credit and share some credit-building tips. We’ll also explore how Lexington Law Firm can give you a clearer picture of your credit habits.
Key takeaways
Paying down your card balances will quickly build credit.
FICO® determines credit scores based on five categories.
Reviewing your credit report can help you strategize.
Table of contents:
Tips for building credit with a credit card
Once you know the factors that influence your credit score, you’ll better understand how to build credit more effectively. When using a credit card, keep the following tips in mind.
Make timely payments
It can’t be overstated how impactful making timely payments can be when building credit with credit cards. Paying off your card balances in full is ideal but may not always be possible due to other financial obligations. In those instances, making your minimum payment will still be beneficial for your payment history.
Keep low credit utilization
Credit utilization weighs your credit limit against your current account balance. Keeping your utilization below 30 or even 10 percent could steadily improve your credit, but if you can’t keep it that low, just try to get it as low as possible.
Here’s an example of credit utilization at play: if you have a credit limit of $1,000 and a current balance of $300, you’ll be at 30 percent utilization. If you lower your balance to $100, you’ll be at 10 percent utilization.
Be selective with your cards
As your credit score rises, you’ll likely receive dozens of credit card offers each month. Be selective about which cards you apply for—if you’re a frequent shopper at a certain store, responsibly using your credit card can improve your credit and help you get some good rewards.
Check your credit report
Your credit report should accurately reflect your financial activity, but there could be errors that are impacting your credit health—this happens more often than you might think. Lexington Law Firm can help look out for errors and help you address them. Our services also include lost wallet protection in case you misplace one of your credit cards.
How are credit scores determined?
Your activity with a credit card is interconnected with your credit score. The Fair Isaac Corporation (FICO) is a trusted credit reporting company that evaluates your credit habits based on five factors: payment history, credit utilization, age of credit, credit mix and new credit.
Responsible credit card usage can improve your credit in several ways:
Paying down your credit card balance positively affects your payment history.
Striving to keep your card balances low reflects good credit utilization.
Responsibly handling a credit card for many years helps your age of credit.
Managing credit cards and installment accounts positively affects your credit mix.
Types of credit cards
Different types of credit cards can help you build credit in various ways. Here are several different kinds of credit cards that are commonly used.
Business credit cards
If a business owner meets certain criteria, such as having an EIN or multiple years of activity, they might be able to secure a business credit card. These cards provide business owners with revolving credit that can be used for short-term purchases.
Business credit cards can affect the cardholder’s credit and their business creditworthiness. A business with great credit can be eligible for fantastic loans and better credit card offers over time.
Joint credit cards
Joint credit cards allow two people to apply at the same time and potentially open an account in both of their names. Activity with joint cards will impact both users for better or worse, so it might be best to discuss and agree on usage terms with your partner before applying.
With a joint credit card, both users will be responsible for repaying the card’s balance and maintaining a low utilization rate. If one user exceeds the joint card’s credit limit, both will see dings in their credit.
Secured credit cards
Secured credit cards require applicants to place a cash deposit when opening their account. These cards often have very flexible requirements, which makes them excellent credit cards for bad credit borrowers.
Most secured credit cards also come with low credit limits and high interest rates—largely to discourage cardholders from misusing their funds. Secured credit cards can serve as excellent starter cards and help individuals repair their credit.
Student credit cards
Standard cards often have requirements that many college students might not meet. Student credit cards can bridge that gap. These cards normally have low or no credit requirements and might even offer rewards for strong academic performance.
Securing and responsibly using a student credit card can help you build credit early in life. When you graduate and are looking to join the workforce or pursue a postgraduate degree, your better credit can grant you access to much-needed funding.
Retail credit cards
Large commercial stores and online retailers may offer these kinds of credit cards. Retail cards can only be used exclusively for store-related purchases. However, rewards like cash back and exclusive discounts might be worth it if you frequently shop at a certain retailer.
Retail credit cards can help you build credit when used responsibly. While it may be tempting to go on a shopping spree with your card, exercising restraint (and staying within your credit limit) will positively affect your credit over time.
Should I pay off my credit card after every purchase?
Payment history and credit utilization greatly impact your credit, so yes, frequently paying off your account balances is possibly the fastest way to build credit over time. Making small purchases with a credit card and swiftly paying off your balance can be an effective strategy.
Ultimately, it’s important to spend within your means and only use your credit card for purchases that you can repay.
Get your credit snapshot with Lexington Law
Credit cards can be very powerful tools for improving your credit—if you know which ones best suit your needs. Lexington Law Firm can provide a credit snapshot that includes your credit score, a credit report summary and credit repair suggestions.
If you’re thinking about applying for new credit cards, getting your snapshot can help you refine your selection.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
Reviewed By
Moriah Beaver
Associate Attorney
Moriah is an attorney practicing in consumer advocacy at Lexington Law.
Before joining Lexington, she represented plaintiffs in personal injury litigation, dealing with claims arising from car accidents, slip and falls, and dog bites. Moriah studied English at Brigham Young University for her undergraduate degree and went on to graduate from Brigham Young University’s J. Reuben Clark Law School. She is from Hau’ula, Hawaii, but has been a resident of Utah for over 10 years now.
When the Canada-based BMO bank acquired Bank of the West, headquartered in the U.S., in 2021, American consumers gained access to BMO’s credit card portfolio, which includes personal and business cards.
As of this writing, BMO offers two cash-back cards, a travel card, a 0% APR/balance transfer card and a secured card. However, a BMO representative confirmed that the card offerings and current card benefits may change in early 2024.
Here’s what you need to know about these cards before deciding whether to apply for one.
🤓Nerdy Tip
While BMO offers business credit cards, this article covers only its personal credit card offerings.
For a break on interest: BMO Platinum Credit Card
If you need an extra-long reprieve from interest, your best option among the BMO cards is the Platinum Credit Card. For a $0 annual fee, cardholders get 0% APR on purchases and balance transfers for 15 months (as of this writing). There are two important caveats to these offers, though: You may lose the 0% APR benefit if you make a late payment, and the balance transfer must be completed within 90 days of account opening in order to get the 0% APR offer.
The balance transfer fee for all of BMO’s personal credit cards is $10 or 4% of the amount of the balance transfer, whichever amount is greater. BMO only allows balance transfers of credit card debt. And as is standard with most issuers, it doesn’t permit transfers between BMO accounts.
As balance transfer offers go, this is a decent one, but it’s possible to find credit cards with longer interest-free promotions. The Wells Fargo Reflect® Card, for instance, offers 0% intro APR for 21 months from account opening on purchases and qualifying balance transfers, and then the ongoing APR of 18.24%, 24.74%, or 29.99% Variable APR .
🤓Nerdy Tip
All of BMO’s publicly available personal credit cards offer cell phone protection plans. Cardholders are eligible for up to $400 in coverage except for Premium Rewards cardholders, who get up to $600 worth of coverage. To qualify for cell phone insurance, you must pay your cell phone bill with a qualifying BMO credit card. A $50 deductible is required for each claim.
For building credit: BMO Boost Secured Credit Card
BMO’s lone secured card requires a $25 annual fee and a minimum $300 security deposit. Those numbers are on the higher end compared with other secured cards. The Discover it® Secured Credit Card, for example, has a $0 annual fee and a $200 minimum security deposit — and it earns rewards, which the Boost Secured card does not.
However, the Boost Secured does offer two benefits rarely found in other cards for people with bad or limited credit: cell phone insurance and rental car insurance.
For travelers: BMO Premium Rewards Credit Card
The only travel card in BMO’s credit card portfolio, the Premium Rewards card, offers some solid perks for a $79 annual fee, which is waived the first year. Some highlights:
15% bonus points on your account anniversary (15% of total purchases made in the previous year).
A sign-up bonus of 35,000 bonus points when you spend $5,000 within 3 months of opening your account (as of this writing).
Access to over 850 airport VIP lounges worldwide with Priority Pass Select, plus two complimentary visits to participating lounges.
No foreign transaction fees.
Lost or damaged luggage insurance.
By comparison, the venerable Chase Sapphire Preferred® Card awards a 10% points bonus on each account anniversary and doesn’t come with lounge access, and its annual fee is slightly higher than the Premium Rewards card. However, unlike the BMO Premium Rewards card, the Chase Sapphire Preferred® Card features travel partners to which you can transfer your points, often for outsize value.
The Premium Rewards card also earns the following rewards in BMO’s proprietary currency, Flex Rewards:
3 Flex Rewards points per $1 spent on eligible dining, hotels and airfare (on up to $2,500 in combined spending each quarter), and 1x on all purchases after that.
1 Flex Rewards point per $1 spent on all other eligible purchases.
Flex Rewards points may be redeemed for flights, hotels, merchandise, gift cards and statement credits, among other options. Point values vary depending on the redemption; cardholders can check the redemption value at www.bmoflexrewards.com.
Flex Rewards points don’t expire, assuming your account remains in good standing with BMO.
For cash back: BMO Cash Back Credit Card and the BMO Platinum Rewards Credit Card
Two BMO cards would be good picks as cash-back cards. One earns direct cash back as a percentage of each purchase; the other earns BMO’s proprietary currency, Flex Rewards, which can be redeemed for cash back in the form of statement credit.
BMO Cash Back Credit Card
For straightforward cash-back rewards, the aptly named BMO Cash Back Credit Card is probably the better choice. It has the higher rewards rates, and the rewards categories represent a range of everyday spending. The $0-annual-fee Cash Back card earns:
5% cash back on eligible streaming, cable TV and satellite services.
3% cash back on eligible gas and grocery purchases, up to $2,500 in combined quarterly spending (1% after that).
1% cash back on all other eligible purchases.
The only redemption option is a statement credit. Rewards never expire as long as the account is open and in good standing.
As of this writing, the card also comes with the following sign-up bonus: Get a $200 cash-back bonus when you spend $2,000 within 3 months of opening your account.
BMO Platinum Rewards Credit Card
The Platinum Rewards card, like its Cash Back sibling, earns rewards on gas and groceries, but the rewards rates on the Platinum Rewards card are a hair lower. It earns:
2 Flex Rewards points per $1 spent on eligible gas and groceries, up to $2,500 in combined spending each calendar quarter (1x on all purchases after that).
1 Flex Rewards point per $1 spent on all other eligible purchases.
Redemption options for the Platinum Rewards card are the same as the Premium Rewards card because both cards earn Flex Rewards.
In favor of the Platinum Rewards card, its annual fee is also $0, and it has a good welcome offer: Get 25,000 bonus points when you spend $2,000 within 3 months of opening your account. It also gives cardholders a points bonus every account anniversary equal to 10% of the total points earned in the past year. The Cash Back card doesn’t award an annual bonus.
These are both decent options for cash back. But if you’d prefer a simple, high flat rate back on everything, without the need to keep track of bonus categories, you could consider a product like the Citi Double Cash® Card. It earns 2% cash back on every purchase: 1% back when you buy, 1% back when you pay it back.
The card has a $0 annual fee, and it also offers a 0% intro APR on Balance Transfers for 18 months, and then the ongoing APR of 19.24%-29.24% Variable APR.
Who doesn’t want to be rewarded?
Create a NerdWallet account for personalized recommendations, and find the card that rewards you the most for your spending.
A penalty annual percentage rate (APR) is a heightened interest rate that can be issued if a person doesn’t use their credit card according to the card agreement. Card issuers explain the exact criteria that can lead to a penalty APR in multiple ways, like the terms and conditions section of a credit card application and in cardholder agreement documents.
A CD rate refers to the interest someone can earn on a certificate of deposit over time.
Key Takeaways:
Banks provide the criteria for issuing penalty APRs in their cardholder agreement documents.
APRs only apply to a card’s balance at the end of a statement period.
Most penalty APRs last for a minimum of six months.
How Penalty APR Works
Bad credit card habits, such as routinely neglecting a minimum payment, can result in a penalty interest rate. Penalty APR usually maxes out at 29.99 percent, which can still be manageable with the proper know-how.
Let’s say you have a 29.99% penalty APR and a statement balance of $500 on your card. To figure out how much interest you’d have to pay, divide 29.99 by 12 (representing each month of the year). You would get 2.499, which you can then divide by 100 to get 0.02499. Multiply your $500 balance by 0.02499, and you would owe $12.49 in interest for the month.
Some issuers base things on a daily periodic rate, so you’d divide the APR by 365 instead of 12, then follow the remaining steps.
How to Avoid Paying the Penalty Rate
Remember that you only have to pay interest on a card if you have an outstanding balance by the end of the statement period. If you manage to completely pay off your balance, your 29.99% penalty APR won’t generate any interest.
How Long Will a Penalty Rate Last?
According to the Consumer Financial Protection Bureau, credit card issuers must reconsider a cardholder’s penalty interest rates after six months. So, as long as you make the minimum payment amount six consecutive times, your interest rate will likely return to normal on existing balances.
These rules apply to consumer credit cards, not those issued to small businesses. With a small business card, several infractions can lead to a penalty interest rate. These can include missing a single payment, spending over the credit limit, or having payment returned for insufficient funds.
Business credit cards are largely exempted from the CARD Act, so each issuer may have different rules about how and when cardholders may have their penalty interest rates cleared. Small business credit cardholders facing penalty interest rates should contact their card issuer for more information.
Steps to Take If You’re Paying Penalty APR
While it may be disheartening to receive a penalty APR, it’s entirely possible to manage this change. Here are several actionable steps you can take when you’re dealing with a penalty APR:
Make your minimum payments: Consistently making your minimum payments will keep your credit score from dropping and display financial responsibility to your card lender.
Limit your credit card usage: Only use your credit card for essentials when managing a penalty APR. If your penalized card is linked to any subscriptions, consider canceling them for now.
Use autopay: Use autopay to ensure that you don’t accidentally miss your minimum payments.
Meet with a financial advisor: Financial advisors can offer tailor-made personal finance advice to help you with your unique circumstances.
Do All Credit Cards Have a Penalty APR?
While there’s no such thing as a good credit penalty APR, some cards have much more manageable interest rates than others. Moreover, some cards never impose higher rates on delinquent cardholders.
Examples of cards without a penalty interest rate include the PenFed Promise, the Discover it®, and the Citi Simplicity®. There are no annual fees for these cards. On the other hand, the PenFed Promise and Citi Simplicity® have no . However, Discover it® does have a competitive cashback program.
Does Penalty APR Affect Credit Score?
A penalty APR won’t affect your credit score in and of itself. However, payment history makes up the largest portion of your credit scores, so the fact that you’ve missed multiple payment dates could significantly decrease your credit standing.
Exceeding your credit limit can incur a penalty APR and increase your credit utilization ratio—which compares your current account balances with your total credit limit. Professionals urge cardholders to stay below a 30% utilization rate, which would be $300 out of a $1,000 credit limit.
Learn More About Personal Finance at Credit.com
Penalty APRs are just one aspect of credit card usage and personal finance management that consumers should know about. Visit Credit.com today to learn more about other financial topics that may be relevant to you, now or in the future.
Launching a business often involves acquiring funding, which can come from personal savings, angel investors, or loans. However, these options may not always be readily available, leaving businesses reliant on lenders such as banks and government programs.
To assess a business’s creditworthiness and determine its suitability for a line of credit, lenders review the company’s credit profile. This assessment considers factors like payment history, credit usage, credit mix, and other financial indicators that reflect the business’s financial responsibility.
Establishing Business Credit: The Foundation for Growth
Building business credit is crucial for new businesses as it allows them to access financing, secure favorable terms on contracts, and establish a strong financial reputation. Here’s a step-by-step guide to establishing business credit:
Incorporate Your Business: Business credit is separate from personal credit, so incorporating your business as an LLC, C or S corporation, or LLP is essential for building a distinct credit profile.
Obtain an Employer Identification Number (EIN): An EIN serves as the IRS’s reference for tracking a company’s tax filings and is required for businesses with employees. Sole proprietorships are not mandated to have an EIN, but it’s recommended to protect personal credit from business liabilities.
Explore Supplier Credit: Supplier credit involves extending payment terms for purchases, allowing businesses to access supplies and pay for them later. This option is particularly beneficial for startups with limited cash flow.
Leverage Vendor Credit: Vendor credit provides essential services or products on short-term financing terms, typically with minimal requirements. Net 30 accounts, where payment is due within 30 days, are a common form of vendor credit.
Utilize Service Credit: Consistent and timely payments for services like internet, web hosting, cable, power, and cellphone airtime can also contribute to building business credit. These deferred payment contracts demonstrate a business’s commitment to financial obligations.
Consider Retail Credit Cards: Retail credit cards are often easier to obtain than traditional business credit cards and may offer rewards like cashback, points, and discounts. These cards are typically limited to a single store or a major retailer’s network.
Apply for Business Credit Cards: Business credit cards provide access to revolving credit, allowing businesses to charge company expenses and steadily build their credit profile. These cards can be used for various expenses, including licenses, insurance, taxes, utilities, payroll, supplies, and marketing.
The Path to Success: Building Credit Over Time
Establishing business credit takes time, especially for startups. However, by utilizing financial tools like supplier credit, retail credit, and business credit cards, businesses can cultivate a strong credit profile and pave the way for future growth and success.
Update: This offer has been sent out now on many U.S. Bank personal and business cards. Updated below.
The Offer
Check email for the following offer on U.S. Bank/Elan/Fidelity personal or business credit cards:
Get $10/1,000 when you pay two or more utility bills with your Fidelity Rewards Visa Signature Card by January 31, 2024.
Others got an offer for $15.
Others got an offer for $25.
The Fine Print
Targeted cardholders are already enrolled, no special enrollment necessary.
Promotion period is from October 25, 2023, through January 31, 2024.
To receive this offer, you must pay two or more electric, gas, water or sanitation bills by January 31, 2024.
The Reward Points award will be applied to your account 2-3 billing cycles after the end of the promotion period. The maximum number of Reward Points awards is one. This offer is not transferable. Your account must remain open, have available credit, and be current (no minimum payment past due) to qualify. This offer may not apply if your credit card has changed to a different type of card within the last 12 weeks or changes before the Reward Points award is applied. As Elan Financial Services cannot control how merchants choose to classify transactions, Elan Financial Services cannot guarantee a transaction will qualify. Contact your billers to learn what types of payments they accept — not all billers accept credit card payments. If you have any questions, call Cardmember Service at 888-551-5144.
Our Verdict
Nice little bonus. Just keep in mind the Fidelity card has a minimum $25 cashout threshold.
Visa and Mastercard are both card networks. Both organizations manage the payment networks through which their cards work. Visa and Mastercard are different companies, but they operate in a very similar way.
Four credit card networks tend to compete for space in consumer wallets. They are Mastercard, Visa, Discover and American Express.
According to Statista, Mastercard and Visa have had the largest market share for a while. As of 2021, they accounted for more than 87% of the market. Compare that to Amex’s 10.5% and Discover’s 2.2% and you can see that most credit cards are Mastercard or Visa.
But is one better than the other? Are there really any differences between these two major credit card networks? Find out in our guide to the difference between Mastercard and Visa below.
In This Piece
What’s the Difference Between Mastercard and Visa?
While they’re both credit card processing networks, these are unique and separate companies. They were founded at different times.
Originally known as the BankAmericard credit card program, Visa launched in 1958. Mastercard began as Master Charge: The Interbank Card when it emerged as a BankAmericard competitor in 1966.
Visa cards don’t work on the Mastercard network, and vice versa. You can’t, for example, use a Visa to pay for something in a store that only accepts Mastercard.
How Are Visa and Mastercard Similar?
There are more similarities between Visa and Mastercard than differences. As mentioned earlier, these are both card networks. They both play the middleman between payment processors and issuing banks.
Both companies operate globally, so if you alert your issuer in advance, you should be able to use your Visa or Mastercard in another country when you go on vacation. Whether you pay fees for this service depends on your card issuer and account details—not on Visa or Mastercard.
Both Visa and Mastercard have tens of millions of merchants in their networks, and both companies’ merchant fees are comparable. Both organizations are publicly traded.
What’s the Difference Between a Network and an Issuer?
The credit card network is the middleman between the payment processor and the issuer of the card. When you pay with a credit card, the information is processed through the network to the bank that issued your credit card. On the other side of the transaction, the data that supports the funds transaction is also processed through the network.
Visa and Mastercard are credit card networks. They’re responsible for the infrastructure for these transactions and for protecting the information as it passes between the payment processor and the issuer. For this service, the credit card networks charge a fee—usually paid in part via a small percentage of every transaction.
An issuer is the bank that issues the card. Examples include Chase, Citibank and Capital One. The issuer is the entity that decides whether you’re approved for a credit card and sets interest rates and fees. It’s also the lender that pays for the goods you purchase with your credit card and the entity you pay back with your payments.
How Does Payment Processing Work?
Visa and Mastercard credit card and debit card payments all go through the same payment process—albeit on different networks. The process looks like this:
Consumers swipe cards—or tap contactless cards—in physical stores or enter card details online.
Merchants send payment authorization requests to their payment processors.
Payment processors send payment requests to the appropriate card network.
Card networks “ask” issuing banks for payment authorization.
Issuing banks approve or deny the transaction.
At this point, transactions are—hopefully—authorized, but they’re not settled yet. The process must continue:
Merchants send approved payment requests to payment processors in batches.
Once again, payment processors send transaction details to Visa, Mastercard or other applicable card networks.
Card networks “ask” issuing banks for previously authorized funds.
Issuing banks release the funds, which travel to merchant banks.
Credit card processing network fees get taken out along the way.
Merchant banks transfer funds into individual merchant accounts.
At this point, the store or other merchant has been paid for the goods or services you bought with your credit card. Your next statement should also reflect the purchase.
Other Mastercard vs Visa Similarities
Visa and Mastercard issuers have a range of products to choose from. Debit cards let you spend money already in your bank account—plus your overdraft if you have one set up. Meanwhile, you must fund prepaid cards in advance.
Visa or Mastercard credit cards have the following things in common.
1. Credit Scores Matter
Card issuers make decisions based on consumers’ credit scores. If you want a card with an extra-low APR and a really high credit limit, you’ll need a top-notch credit score. Lower credit scores generally mean lower credit limits and higher interest rates.
If you’re new to credit or you need to repair your credit, look for a credit builder or credit repair card. You won’t have a very high limit to begin with, and your APR might not be very competitive, but if you make regular payments, you’ll soon qualify for a better product.
Surge Mastercard® Credit Card
All credit types welcome to apply!
Monthly reporting to the three major credit bureaus
Up to $1,000 credit limit doubles up to $2,000! (Simply make your first 6 monthly minimum payments on time)
Fast and easy application process; results in seconds
Use your card at locations everywhere that Mastercard® is accepted
Free online account access 24/7
Checking Account Required
See if you’re Pre-Qualified without impacting your credit score
2. Rewards Cards Provide Value
Mastercard and Visa both partner with issuers that offer rewards cards. Rewards include air miles, points, store-specific rewards, food and beverage rewards and cash back. If you use your rewards card in a savvy way, you can save a lot of money.
3. Fees Vary
Visa and Mastercard don’t set fees—issuing banks do. As a result, fees for Visa and Mastercard products vary widely. Make sure you’re familiar with the over-limit, balance transfer, late payment, and foreign transaction fees on each of your credit card accounts—and stay away from credit cards with unreasonable fee structures.
4. Smart Wallets Protect Information
Both Visa and Mastercard cards are compatible with smart wallets like Apple Pay and Google Pay. Smart wallets hide your card information, so they’re more secure than swiping a card or entering card details online. Every year, more and more brick-and-mortar and online retailers accept smart wallet payments.
5. Discount Programs Save You Money
Some credit cards—especially business credit cards—incorporate high-value discount programs. The Visa SavingsEdge program, for example, can save you more than 15% when you shop with qualifying merchants. Mastercard has a similar program, called Easy Savings. In both cases, you need to enroll your card to get money back.
Which Is Better: Visa or Mastercard?
What’s the difference between Mastercard and Visa? Not that much, actually. The major difference is the company that runs the network. Merchants that accept one usually tend to accept the other, and more merchants accept Visa and Mastercard than any other type of card.
Instead of considering whether you should get a Visa or a Mastercard, think about what type of card you want and which bank you want to work with. Apply for a card that offers the rewards you want and has fees that match your budget. Whichever one you choose, you’ll be able to use it around the globe and get a very similar experience from the card network.
The following is a guest post by Daniela MckVicker, a blogger for Top Writers Review.
Considering offering credit to your customers? A credit policy is a document that you need. It outlines the conditions of credit sales, giving your customers one more way to make orders. For your business, it helps encourage new sales and manage associated risks.
If you need help with writing a business credit policy, consider these guidelines.
What Is a Credit Policy?
A credit policy is a document that defines credit and payment terms for customers and policies to mitigate risk from extending credit to those who can’t meet their obligations. These guidelines are critical for businesses selling their products and services in credit.
When broken down into essential parts, a credit policy includes:
Evaluation of a customer’s creditworthiness
Decision process to extend credit to customers (terms, conditions, etc.)
Credit limits for customers
Methods of dealing with delinquent accounts
A sound credit policy minimizes the risk of not receiving funds from sales made on credit. So, writing this policy requires knowledge of a company’s financial capabilities, applicable laws, and risks involved.
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Before Writing: Credit Policy Do’s and Don’ts
If you’re writing a new draft or updating the current credit policy, keep these tips in mind:
Don’t keep it confidential. Everyone in your company should know how you’re going to manage credit sales.
Don’t make the policy so strict, so you have opportunities to adjust the credit decision-making process later.
Don’t make the policy too broad and/or open to interpretation. This might cause conflicting interpretations by department members or other stakeholders.
Do make credit approval limits clear for those with authority to grant credits.
Do include procedures to reduce credit risks and sales where customers are unable to pay off the debt.
Do include guidelines on keeping company and customer information private.
Do state that any unlawful or unethical behavior within the credit department is strictly prohibited.
How to Write an Effective Business Credit Policy
Let’s go over each important section in business credit policies.
1. Explain the Purpose of the Policy
The first section of a business’s credit policy is dedicated to the conditions, responsibilities, and rights of the credit department. Describe how it works and helps to meet the goals you’re trying to achieve as an organization.
For example:
“The credit department is responsible for establishing payment terms for the company’s customers and monitoring these terms to ensure compliance. The present credit policy describes alternative payment methods to customers.”
Treat this section as an introduction that you’ll later use to teach employees. Save the specifics for the subsequent parts – there’s plenty of space for that.
2. List the Roles and Responsibilities of Credit Department Members
Explain the duties of each member who works in the credit department. By doing so, you’re defining their roles and letting them know what’s expected of them.
Here are some common credit department positions, along with brief descriptions:
Chief Financial Officer (CFO). Responsible for managing the entire department, making policies and finance-related decisions
Credit manager. Organizes and controls the credit department by training personnel, setting up credit rules and procedures, and authorizing credit limits. Reports directly to CFO
Collections manager. Manages the credit collection effort by collaborating with third-party collection agencies. Reports to the credit manager
Credit analyst. Reviews financials, evaluates and assigns credit lines for customers
Billing clerk. Prepares the invoices and sends them to customers in time.
3. Describe Credit Application Process
The credit application process is the process that leads to the initiation or extension of credit to a customer. In this section, the main purpose is to explain this process and the procedure of approval.
To apply for credit, customers must also provide a number of documents. Commonly, companies request credit bureau reports, credit references, financial statements, and public records.
Some of the most important points to provide in this section:
Description of conditions on which a customer can apply for credit
Documents the customer must provide to get their application reviewed (bank references, statement of payment terms, etc.)
Identification of credit department employees responsible for reviewing customer applications
Description of the customer’s creditworthiness evaluation and relevant credit limits.
4. Decide Who Can Get Extended Credit
Obviously, your business can’t give away credits like Christmas cookies. In some cases, customers will have histories of not delivering on their obligations–so your policy should call for credit checks on every applicant.
In addition to asking customers to provide relevant documents, have your credit department also get in touch with nationwide credit reporting agencies. The three main credit bureaus are Equifax, Experian, and TransUnion, which can provide a free credit report once every 12 months.
Advise your customers on how and when to talk to a credit reporting agency about their reports. Keep in mind, however, that you’re legally required to ask customers for permission before making a credit report inquiry.
5. Set Credit Limits
The credit policy defines the credit limit for your business. In other words, it gives your employees instructions on the amount to give and when to stop extending credit. Following these guidelines will help to reduce many risks.
For small businesses, a $5,000 credit limit is reasonable. This amount could reach up to $10,000 for a mid-sized company. However, the right amount for your business depends on two things: a customer’s credit history and your liabilities.
First, take a good look at a customer’s documents (income, debts, etc.) to determine the limit they could realistically handle. Second, ask yourself if you could still pay your own liabilities if that customer failed to pay credit on time. If the answer is “no,” then reducing the credit limit should be a good idea. Make sure to include these credit limits in your policy.
6. Define Terms and Conditions of Credit Sales
These are the terms and conditions for delivering products or services on credit. They’re essential for credit applications, sales contracts, emails, orders, and invoices–all sales-related documents.
They protect your rights by setting credit limits, customer responsibilities, and other important points. For example, describe when you will begin charging interest, extension conditions, interest rate, late payment fees, early payment discounts, and deposit requirements.
7. Plan for Handling Past Due Accounts
Unfortunately, even with your best effort to manage credit risks, some customers won’t pay collections on time. That’s why you need to have a plan for pursuing unpaid debts.
In most cases, credit policies instruct to send urgent payment reminders. Consider using debt collection agencies if a customer doesn’t pay after getting notified multiple times. Should that customer fail to meet their obligations on more than one sale, close their account.
8. Make Changes
A credit policy should be “a living document.” To evaluate if their credit department helps to meet business goals, companies have to measure its performance. This is where specific goals based on the company’s strategy come in.
For example, the credit department might be tasked with reducing the average number of days it takes to collect on credit sales by 20%. Comparing credit sales data for a defined period defines if the credit department met this goal.
The effectiveness of credit department efforts measured by goals defines changes to be made in the policy. If the department struggles to meet the goals, consider making appropriate changes to the document.
Lenders deny loan applications due to reasons like poor credit, insufficient collateral, industry and more
Getting denied a small business loan doesn’t mean businesses can’t secure one in the future
Before reapplying for a loan, determine why the previous application was denied and make sure you’re applying with the right lender
Starting or growing a business may require financing, but not all business loan applications are successful.
According to the Federal Reserve’s 2023 Report on Employer Firms, 21 percent of surveyed loan applicants were denied for loans in 2022. That number is expected to go up considering lenders are expected to continue tightening their lending standards for the rest of 2023.
We’ll explore the most common reasons for denial and provide solutions to increase your chances of approval when reapplying for a small business loan.
Too much debt
If your business carries a significant amount of debt, it may hinder your ability to repay a new loan. Lenders view excessive debt as a risk because it can lead to default. And if you default on a business loan, a few things may happen, including the lender seizing business or personal property to recover the borrowed funds.
Your best course of action is to focus on reducing your existing debt load. You can do this by renegotiating terms with creditors, consolidating loans or making additional payments. Also, limit the use of your available credit, which adds to your debt and impacts your ability to build business credit.
Bad credit
A business owner with bad credit is a red flag for lenders. It suggests that you may struggle to manage your finances.
If you have a history of late or missed payments and defaults, consider making a few changes to how you manage your personal and business finances. For example, set up autopay so bills are paid on time and review your credit report to dispute errors and inaccuracies.
You won’t see immediate changes to your score. So if you need funds right away, look into lenders who specialize in business loans for bad credit.
Don’t meet the lender’s eligibility requirements
Failing to meet a lender’s eligibility requirements for a business loan can result in denial. All lenders have specific criteria related to credit scores, annual revenue, time in business and other factors.
It’s important to review the eligibility requirements of potential lenders before applying. If you don’t meet the lender’s criteria, consider alternative lenders. But if you are set on working with a specific lender, focus on improving your business’s financial health so you qualify for a loan.
Not enough collateral
With a secured small business loan, businesses must pledge assets that can be seized if they default on the loan. Since the collateral for a business loan is used as a form of repayment and needs to cover the outstanding balance on the loan, if these assets aren’t of significant value, lenders may deny your loan application.
You can work to build up your business’s assets so you qualify for secured financing options in the future, but if you need funding as soon as possible, explore alternative financing options that don’t require collateral.
Bankrate insight
Online lenders typically offer a variety of unsecured business loans, including business lines of credit and merchant cash advances. Loan amounts will likely be significantly lower than secured business loan amounts. If you don’t have a high credit score and strong business financials, you may see loan amounts of $100,000 or less.
Not enough free capital or cash flow
Lenders want to see that your business has sufficient cash flow to repay the loan. If there’s no evidence of enough free capital or cash flow, they can’t approve you.
Before applying for another small business loan, complete a cash flow analysis to figure out ways to better manage your expenses and free up cash so you can afford the monthly payments. You can also increase your revenue. The required annual revenue varies, but if your business brings in at least $100,000, you could get approved with some online lenders.
You can also explore invoice factoring or merchant cash advances, which are short-term business loans designed to help businesses that need quick access to capital.
Don’t have a business checking account
A business checking account is a valuable tool that can help you manage your business finances more effectively. While it isn’t a requirement to start or run a business, many lenders, including OnDeck, Bank of America and Fundbox won’t approve loan applications for businesses without business checking accounts.
To meet this requirement, simply open a business checking account. If your lender offers a full suite of business banking products and services, consider opening an account to establish a relationship and potentially access discounts.
Industry risk
Some lenders don’t want to risk lending to businesses in certain industries due to the odds of failure or unstable revenue. For example, restaurants and real estate businesses may be disqualified from a small business loan.
Research lenders who are familiar with your industry and the associated risks. Many alternative lenders don’t have the same industry restrictions as traditional lenders, so you could be better off going this route. But they often come at a high price due to interest and fees.
Don’t have a business plan
Not all lenders require a business plan, but the ones that do want to see a clear and detailed outline of how you’ll use the loan, how it will benefit your business and if your business has the potential to earn the revenue necessary to repay the loan.
Creating a well-thought-out business plan that demonstrates your vision, strategy, goals and financial potential can get you closer to loan approval. A few things to include are:
Executive summary
Company description
Summary of market research
Financial plan
Why was my SBA loan denied?
Compared to traditional small business loans, SBA loans offer extended terms and reduced interest rates, with average SBA interest rates falling between 10.75 percent and 16.50 percent.
In 2022, SBA approvals for 7(a) loans were under 50,000 and only about 9,000 for 504 loans. That’s according to data from the SBA Weekly Lending Report. When an SBA loan is denied, it could be for similar reasons as traditional loans, but the SBA has additional criteria that businesses may fall short of meeting.
Common reasons for SBA loan application denial include:
Poor personal or business credit scores
Insufficient collateral
Insufficient cash flow
High existing debt
Ineligible business, size or industry
Missing documents or information
Bankrate insight
If your SBA loan is denied, you’ll need to wait 90 days before reapplying. During that time, check with your lender to see why your SBA loan was denied and make changes or consider applying for a different type of SBA loan.
What to do if your business loan is denied
If your small business loan is denied, this doesn’t mean you won’t get the funding you need. You can reapply for a loan, but there are a few things you’ll want to take care of first.
Start by identifying the reason for the denial. Whether it’s due to poor credit history, insufficient cash flow or another issue, this insight is what you need to get your future loan application approved.
Depending on the reason, for example, if you don’t have a business checking account or business plan, you can be ready to reapply in a few days or weeks. But if your business’s poor financial health is to blame, making improvements may take some time but can lead to a more affordable business loan. But if you can’t wait, consider looking into a different lender that is willing to work with you.
Before you reapply for a small business loan, work to boost your creditworthiness by making timely payments and reducing existing debt. And don’t be afraid to explore alternative lenders and government-backed programs with flexible lending criteria.
Bottom line
Poor credit, insufficient cash flow, lack of a business plan and other issues can prevent you from securing a small business loan. It can be disappointing when you get denied funding, but it’s important to understand why because it’s an opportunity to create a plan and implement solutions to significantly improve your business’s financial health. And, by the time you’re ready to reapply, you’ll seem less risky to lenders and have better odds of approval.
Frequently asked questions
Credit score requirements vary by lender, but you can secure a business loan with a score as low as 500.
Yes, it is possible to get a business loan with no money. Certain business loans, such as SBA microloans, equipment loans and business credit cards, are designed for new businesses with no revenue. But waiting to secure financing might be the better option since some business loans may not come with favorable rates and terms for businesses with no revenue.
Getting a small business loan can be challenging, but it depends on the loan type, lender, their requirements and your qualifications, including credit score and annual revenue. Start by getting your personal and business credit scores and reviewing your credit report. Then look at lenders and their eligibility requirements to see which ones will work with you.
I don’t like credit cards. Many smart people — including my wife — use them wisely and never have problems. I’m not one of those people. Most of my money woes stem from credit card debt acquired when I was first out of college. Eventually I wised up — I have not carried a personal credit card in more than five years.
NCN at No Credit Needed has posted a detailed list of the reasons he does not use credit cards. He writes:
I have not used a credit card in over two years. So far, I have yet to find myself in a situation where I had to use my credit card. (I still have one, active, credit card account. I keep my card tucked away in my wallet. I’m not sure it actually works anymore. I do not plan to find out.) I do not advocate closing credit card accounts. I have an account that is open and in good standing. I just don’t use it. What have I learned about NOT using my credit card?
Among the lessons NCN has learned:
Spending cash hurts more than swiping a card.
If you don’t use your card, you don’t get a bill.
He doesn’t care about missing cash-back bonuses or card rewards.
He can use a debit card in nearly every place a credit card would work (including car rentals and hotel reservations).
I, too, have suffered no adverse effects from giving up personal credit cards. It helps, of course, that I use a debit card. I also carry a couple of business credit cards, but I have no problem using them responsibly. Business is business, and is completely separate from my personal life.
I’ll admit that I’ve considered trying to use credit cards once more now that I seem to have developed a solid understanding of personal finance. Ultimately, however, I’ve decided the rewards are minimal and the risks too great. For now, I’m credit card-free and proud of it.