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How to Reduce Credit Card Fees

Rates for business credit cards are still high. Here are ways to knock them down.

Credit card reform this year didn't apply to business credit cards. According to a recent study from financial search engine BillShrink.com, small businesses will be hit with an estimated $420 million more in finance charges in 2010 than they were in the previous year--and card issuers have raised interest rates to more than 15 percent in many cases, and as much as 27 percent in others.

More than a quarter of small-business owners carry an average monthly balance of $14,572 on their cards, the study estimates. So increased charges can really hit home, says Beverly Blair Harzog, spokeswoman for credit card rating site CardRatings.com. But business owners can mitigate the cost:

Boost your score.
Many business credit cards offer incentives for businesses. Doug Minor, founder and president of Life Moves Financial, a financial mentoring program in Westlake Village, Calif., uses the American Express Plum card, which gives him a percentage back if he pays off his balance before the 30-day mark. The card also allows him to choose 60-day payment terms with no discount. By paying his balance early, he saves an average of $50 each month.

Look for rewards.
Business credit card interest rates are based on credit score. For very small businesses, the credit score will be the business owner's; for larger entities, it will be a business score. Applications for new credit account for
10 percent, so avoid opening new lines of credit before you apply for your business credit card.

Cap employee spending.
Many business credit cards, including GM Business World Card (MasterCard brand) and AT&T Universal Business Rewards Card, let you cap employee limits to avoid excessive bills and finance charges. And be aware of who accrues rewards, Harzog says. "If an owner uses the business's credit history to get a corporate card, then the employee earns the rewards," she says. "If the owner uses his personal history to get the card, the rules are different." 

Gwen Moran is a freelance writer and co-author of The Complete Idiot's Guide to Business Plans (Alpha, 2010).

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This article was originally published in the November 2010 print edition of Entrepreneur with the headline: Charged Up.

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