Taking Credit

Losing Interest

What's the catch? Well, credit card companies aren't exactly charitable institutions--far from it. So the promise of free airline tickets and 10 percent discounts on office supplies are proffered in the hope that new accounts will prove lucrative either by bringing in fees or, better yet, interest on unpaid balances. And in many cases, they do just that. Approximately 24 percent of small and midsized businesses that use credit cards carry a balance from month to month, according to a 2000 survey by Arthur Andersen's Enterprise Group and National Small Business United. With those attractive introductory interest rates of 3.9 percent shooting up to 13 percent or higher after the six-month grace period, that's no bargain.

is the estimated percent of disposable income Americans saved in 2001.
SOURCE: Organization for Economic Cooperation and Development

But for entrepreneurs who have the discipline--and the cash flow--to pay in full each month, today's business cards combine a convenient method of payment with practical accounting advantages and useful ancillary benefits. While some of the standard features, such as rental car insurance and reward programs, echo those available with consumer cards, others are tailored to the needs of businesses. For example, American Express, MasterCard and Visa business cards all offer annual and quarterly purchase summaries, fraud programs that protect business owners against employee misuse, credit limits as high as $100,000, online account management, and discounts on business services such as shipping, car rentals and computer equipment.

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This article was originally published in the January 2002 print edition of Entrepreneur with the headline: Taking Credit.

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