Credit Card Advice

Now more than ever, small businesses are relying on credit cards as a stop-gap measure when cash flow is slow. Small businesses often don’t have the clout to negotiate credit terms with their supply chain, so they’re increasingly relying on credit cards as a short term coping strategy. Anywhere from 30 to 60% of small businesses say that cash flow is their greatest financial concern, and the percentages are likely to increase as the recession drags on.

In January 2009, the Bank of Ireland unveiled its 2 for 1 credit card that is a credit card and a personal loan combined. It is designed to allow businesses to make large purchases without incurring huge interest charges that credit cards impose. If a customer is unable to repay a large purchase within the statement date, he or she can transfer the balance to a personal loan, which offers a rate of 6.9% for 12 months. This gives the cardholder a year to pay off the loan before the interest rate reverts to 14.9%.

There are limits, of course. The large purchase must be €500 or greater, and only two purchases can be on the extended payment plan at a time. As a comparison, the average personal loan rate in Ireland is 9.7% to 12.2%.

MBNA Ireland, which is part of Bank of America is one of the largest independent providers of credit cards in the world, and offers numerous business credit card options. Businesses with credit cards may choose a card because of reward schemes and cash back bonuses, which can be welcome if cash flow is steady enough to pay off the balances every month. As a temporary method of debt management, a business credit card is often the simplest solution.

MBNA offers a number of credit card choices, including the MBNA Platinum Credit Card, the MBNA Gold Credit Card, and the MBNA Standard Credit Card. The Platinum card offers 0% APR on balance transfers over 10 months, no annual fee, up to 58 days interest free on card purchases, and a variable 14.9% APR. The Gold card charges you 1.9% APR on balance transfers for 6 months, no annual fee, and up to 58 days interest free on card purchases with a variable 14.9% APR. If you qualify for the Platinum card, you should get it rather than the Gold. The Standard credit card has the same features as the Gold, except the APR is a variable 16.9%. Of these three, try qualifying for the Platinum first, and if you don’t, try Gold, then Standard if necessary.