Credit Card Blog

Today, entrepreneurs have a vast array of business credit cards and options to choose from, yet only 40% of the 2/3’s of small businesses take advantage of benefits by using a business credit card. It’s imperative that businesses account for each expense, whether it’s for quarterly inventory, tax purposes, or expense reports. Here are just a few ways entrepreneurs can benefit through the use of a business credit card.

A monthly itemized statement is provided that makes it easy to track expenses. With this, the business isn’t doing a last minute scramble, hunting down receipts and expense reports. Using a business credit card also gives the entrepreneur the opportunity to quickly build their business’s credit. This is especially beneficial when a need arises to apply with a local lender for a line of credit for inventory or larger office space.

Monitoring employee purchases is no longer a dreaded hassle. Since there are usually just a few designated employees with purchasing privileges, tracking is now simplified and removes the time-waster of filling out expense reports. It’s still a wise practice to require employees keep and submit their receipts.

Put rewards to good use for business travel for seminars & meetings, office supplies, and discounts on services such as internet or phone.

When applying for a business credit card, entrepreneurs should apply with the financial institution they personally deal with and take advantage of their existing relationship.

Take advantage of the 21-day grace period for payments, offered by most business credit card companies. This is important when an entrepreneur is building initial cash flow.

Pay card bills on time to build your business’s good credit. Also, consider paying those bills online, thus avoiding the ever rising cost of stamps and post office hours and lines.

When entrepreneurs fully take advantage of the many benefits of using a business credit card, their financial management stress lowers significantly. Using a business credit card to track expenses, obtain useful rewards, and establish good business credit are just the immediate perks with many others to follow.

Transparent Financial Services, of Chicago, IL was awarded a grant from CEC (Chicagoland Entrepreneurial Center) to support TransFS’s rapid national growth. Clients of TransFS are businesses in need of financial services, such as locating a dependable credit card processor. Transparent Financial Services are recipients of this grant through the CEC’s Entrepreneur in Residence program. This program places startup companies displaying significant growth-potential with entrepreneurs who are experienced with business success.

Transparent Financial Services now have over twelve markets in the customer base of their comparison-shopping site offered to their clients through their credit card processing services. TransFS has a wide network of credit card processors bidding on each merchant’s services but, they are all bound by strict contractual stipulations. The system is carefully designed so that a client is not contacted by or connected with a credit card processor until they have officially chosen one through the services of Transparent Financial Services.

TransFS was established in 2008 and their client base of businesses now includes more than twelve various industries. The owners founded Transparent FS, while in Business school, after their many challenges as entrepreneurs trying to choose the best credit card processor and locating top quality financial service providers. They have developed a unique strategy which enables them to locate processing fees that are about 40% lower than average. TransFS has already saved some of their clients well over $72,000 per year in credit card processing server fees. Even their processing providers are rewarded when they adhere to contract regulations and earn TransFS certification, by becoming eligible for quicker contact with clients at reduced costs. Transparent FS also offers their services to all business clients free of charge.

Small business owners often complain about the time consuming task of keeping track of their finances and purchases for tax time. It’s imperative that a business can account for each of their purchases – both for tax purposes and for strong management of their business.Using a business credit card can eliminate some of the time spent categorizing and tracking each of your expenses and purchases.

When you use a single credit card for all business purchases, your monthly credit card statement will give you a record of all of your expenses by the month, broken down by individual purchase. You can often get a year-end statement from the credit card company as well, with purchases already categorized by type and by month which will make your job (or your accountant’s job) of balancing your books much easier.For businesses that have a key employee or two, using business credit cards allows you to keep a close eye on the items they’re purchasing or paying for on behalf of your business. You can issue your key employees a card in their name, and then review the purchases made to each individual card on a monthly basis.Additionally, many credit cards designed for business use offer discounts for businesses – from office supplies to travel discounts to merchandise discounts or rewards. Select a card based on the type of purchases you need to make most often for the most benefits.

Did you know that merchants pay a fee to process credit card purchases when you shop in their stores? These are called interchange fees. They are represented by a percentage of all of the sales that are charged onto credit cards which is only several points. But it adds up quickly for merchants. There are a few things you need to know about interchange fees and how they affect you as a credit card user.

Higher prices

Interchange fees are one of the highest expenses of a merchant right behind payroll. In fact, they are more than rent most of the time. That creates a situation where merchants are forced to raise prices as an off-set to these fees. They will say otherwise, but it has been all too often proven otherwise. Take away: merchants that do not accept credit cards might have lower prices.

Convenience to you

Merchants do not have much of a choice in accepting credit cards if they want to remain competitive in today’s retail market. Not doing so puts them at a disadvantage to their competition. Take away: it is easy for you to walk in and pay for your purchases with credit or debit cards because of this system.

Pending legislation

There is a law pending that will likely create a higher fee for interchange rates for merchants. This law will allow merchants to charge higher prices specifically when you use credit cards for your purchases. Take away: higher interchange fees means higher prices for you at the register.

There are different interchange fees for different merchants from card issuers. For example, MasterCard has over 120 different rates for the various kinds of retailers. Supermarkets have the lowest rates, while Internet based retailers pay the highest.

Knowing the above information can help you be a wise shopper and user of credit cards.

If you’re a fan of credit card travel or dining rewards programs, you’ll want to become a member of the FlyerTalk forums. It’s an interactive community that lets people share information about rewards programs and travel perks they’ve gotten from various rewards cards.

In the forums, you can read from real people how they’ve been able to maximize their points and miles. Some people discuss credit card retention benefits – where they’ve been able to get extra rewards or points by calling a certain phone number or telling a customer service representative they planned to cancel their credit card account.

Unlike the credit card websites and blogs, this forum is made up of real people who use the various credit cards and participate in the rewards programs. The information you gain from these forums should be without bias or sales agenda, which makes it a little more trustworthy than information you find on a credit card company’s website.

You can use the community for free by creating an account. They welcome you to read the posts and get comfortable and then begin asking questions or sharing information as soon as you feel ready. While they can’t guarantee the information found on the site is 100% accurate all the time (after all, people are posting it and there is a potential for error), you can find out about some great deals, contests, and offers for reward program benefits by becoming a member.

If you thought credit scores were only used to help lenders decide whether or not they should extend credit – think again! Sure, you may know that there are employers who run a credit check before they hire; and that your car insurance premium is partly based on your credit score… but did you think your internet browsing would be affected by your FICO?

Google has started to experiment with their Google ads by showing more expensive products and services to individuals with higher FICO scores. Google has always been known for their pay per click advertising and the ability for advertisers to target specific markets – but is this taking it a step too far?

Right now, there is a database of about 2 million people through “Compete”, who agreed to share their credit score when applying for a new credit card. These people are then targeted with specific Google ads when they use their computer, based on what their credit scores are. This allows advertisers to reach consumers who qualify for their products – for example, advertisers trying to sell mortgages to people with FICO scores over 700 would only show their ads to this group of internet users. Primarily, this data will be used to target users seeking credit cards, but any company interested in displaying ads to a group of people with a specific credit score would be able to do so.

It wasn’t long after credit cards were first introduced in America that the companies realized it wasn’t the people who paid their balances in full each month that would make them the money – it was the people who carried a balance from month to month that would help them become the multi-billion dollar industry they are today.

The trouble with giving credit to the riskier customers of course, was that they had to figure out how to decide which cardholders would pay something each month, and not just run up a huge bill and skip out completely.

Two solutions were created – the first was to create a number of different credit cards, each with different credit limits, terms, and interest rates and give them out to people based on their credit score and credit worthiness. The second solution was a strategy to learn how different types of customers pay their bills. Companies started analyzing how people behave based on what kind of purchases they made on credit cards – and you might be surprised just how detailed their investigations and research have gone.

In 2002, an executive at Canadian Tire had breakthroughs in credit cardholder research when he analyzed the information from every customer who paid with credit card at Canadian Tire stores. The stores sold electronics, kitchen supplies, automotive goods and sporting equipment. Martin could see what cardholders were purchasing. He was able to pinpoint which brands people bought who would continue to pay their bills on time versus the brands people bought that would result in late payments or no payments at all.

People who used their credit card at a bar would typically miss credit card payments, while 47% of people who used their cards at a specific bar could be expected to miss 4 payments in a 12 month period!

Math geniuses who did nothing but study the trends and statistics of credit card use versus how the cardholder makes their payments were hired by all the major credit card companies to analyze risk for lending.

People having babies or getting married were shown to be more responsible with their credit cards and suddenly credit card companies were marketing to people getting married or having babies. Signs of depression or desperation (like seeing marriage counselors or going to pawnshops) would result in credit card companies reducing credit lines since they were more risky.

“If you show us what you buy, we can tell you who you are, maybe even better than you know yourself,” said Martin, who now works for Wal-Mart Canada. “But everyone was scared that people will resent companies for knowing too much.”

Data driven psychologists are not only employed by credit card companies to determine a cardholders level of risk, but also to handle their credit card collection calls. They know how to talk to people and what to say to get money out of them based on the things they’ve bought and the things they say during the phone calls.

Learn more about credit card company psychology: NY Times article

It’s been a well known “secret” that credit card companies analyze cardholder spending and how they make their payments as a method of determining risk. They’ve learned that people who buy certain brands are more likely to pay their bills late or not at all; and what sorts of products paid for with credit will pretty much predict the cardholder will always pay their bills on time.

As an extension of this analysis, it’s possible that certain spending will start to affect your credit score. People who use their credit cards with the following industries may be among the first cardholders to experience credit score adjustments due to their spending habits:

• Gambling (casinos and racetracks)

• Pawnshops

• Liquor stores

• Marriage counseling

• Massages

• Spas

• Bail bonds

• Hospitals & Doctors offices

• Court fees

• Escort Services

• Thrift stores or secondhand stores

Based on research of cardholders making purchases with these industries and the probability of these cardholders paying their bills late or not at all – these are a few of the first industries that are considered suspect when a lender is deciding whether or not to extend you credit.

In 2010, the credit card legislation changes will provide regulations for just how far a credit card company can go to learn about you and your purchases. If you want to be sure your credit score isn’t being adjusted based on where you shop - be aware of where you are using your credit cards.

If you read the terms and conditions for your credit cards, you’d probably read that your credit cards’ billing cycle is “between 20 and 25 days”, or something similar.  In other words - the cycle varies, give or take a few days.  You might be thinking, so what?  Here’s the issue with billing cycles that are not set in stone:

Many people like to use their bank bill pay feature.  Many banks offer this feature for free and it’s extremely convenient.  You simply set up your accounts with your bank account, decide which day of each month you’re going to pay the bills and schedule with a few clicks of your mouse.

At first - everything will work out perfectly.  But then the varied billing cycle days will rear it’s ugly head.

At some point, your due date will change.  Depending on how close to your actual statement due date you schedule your monthly payments, eventually - that due date could change enough to cause your scheduled payments to get paid AFTER the due date.  Since your payments are all scheduled in advance (set it and forget it), you probably aren’t watching your statement closely to make sure each payment will be applied on time.

If you’re using an automatic bill payment for credit cards with a billing cycle that is variable - make sure to set your payments so they’re being paid a good ten days or more BEFORE the due date.  It should give you enough of a buffer that even as the billing cycles fluctuate, your due date won’t come before your scheduled payment.

MasterCard’s Easy Savings Program helps cardholders save money at various merchants and retailers when they shop using their MasterCard credit card. Previously, the Easy Savings Program added the United States Postal Service to the list of merchants, giving program members an automatic 5% savings when using the US Postal Service website for Click N’ Ship supplies, including shipping labels and postage.

Now, Dunkin’ Donut lovers can take advantage of a 5% discount on any purchases made at Dunkin’ Donuts for members of MasterCard’s Easy Savings Program. Obviously, cardholders are benefiting from savings at their favorite retailers, but it’s important to note that merchants who participate in MasterCard’s Easy Savings Program are also benefiting. The rebates and discounts cardholders receive encourage people to shop there, including people who maybe wouldn’t have shopped at that retailer without the discount as they want to gain the most benefit from the Easy Savings Program membership.

MasterCard estimates that members of the Easy Savings Program spent 60% more with merchants who are part of the program.