I remember how excited I was when I first decided to open my own custom-made apparel store. For years, I had imagined what it would be like to finally branch out and start selling my own women’s clothing designs, but nothing could have prepared me for the financial hardships I was about to face. Being young and naïve, I decided to take out a series of loans and credit cards in order to fund all that I needed for my new business. At first, it didn’t seem like that big of a deal, but over time, things got out of hand. I was spending way more than I had coming in, and I eventually decided to close the store. It was my first tough lesson in becoming a responsible entrepreneur. Whenever I talk to young entrepreneurs, I always like to give them advice on how to approach using credit cards for their business endeavors, so if you’re a young entrepreneur, listen up; here are three things you should keep in mind when it comes to using a credit card.
Know your credit history
Your ability to receive a credit card with decent interest rates depends upon your credit score and credit history. Unfortunately, many young entrepreneurs don’t know where their credit currently stands. Before you venture out and pursue your entrepreneurial dreams, find out what your chances are of getting a credit card with good rates. The best way to do this is to pull a free credit report from at least three different credit-reporting agencies. In case you didn’t know, a credit report will show your account history and all the factors that have injured your credit.
Know your limitations
Wouldn’t it be wonderful if everyone paid off their credit card balance at the end of every month? Alas, we don’t live in such a world. Before you charge anything to a credit card, take some time to figure out if you’ll be able to pay it off in a reasonable amount of time. If you don’t think you can deal with high-interest rates – ranging from 13 and 20 percent –you should analyze whether or not you’re financially ready to pursue your entrepreneurial dreams. If you do take out a credit card and discover you’re having trouble making reasonable payments, however, contact your creditor and explain your difficulties. Oftentimes, they’ll be able to help you setup a decent payment plan and even lower your interest rates.
Know how to pay on time
Paying your bill on time is of the utmost importance in maintaining a sound credit score, so always make sure to pay all your bills on time. If you’re afraid you might forget to make payments, go ahead and set up automatic payments. Why? Well, paying on time boosts your credit score and even helps you negotiate lower interest rates. Even if you can’t pay off as much as you’d like each month, always make reasonable, consistent payments. You might think a day or two won’t matter, but in the long run, it could affect your ability to operate a successful business.
If you want to break off and pursue your entrepreneurial dreams, keep these three credit card facts in mind.
As a regular contributor to several finance websites, such as www.CreditScore.net, Stella Walker uses her knowledge of economics, consumer trends and budgeting to help readers better understand their own personal finance issues. Feel free to leave your questions and comments for her below!