Transferring Your Personal Credit Card Balance to a Business Credit Card

Written By
Julija A.
Updated
May 31,2022

If you’re a business owner looking to save money on credit card payments related to your private life, you may want to consider a business credit card balance transfer.

This is a great strategy that can offer many benefits, including lower interest rates and increased spending power. This article will discuss how the transfer process works and why it's a valuable tool for business owners. Let’s get started!

What is a Credit Card Balance Transfer, and How Does it Work?

A credit card balance transfer is a process by which a credit card holder takes advantage of lower interest rates on some forms of debt to minimize the fees associated with debt repayment.

Typically, balance transfers involve moving debt from one credit card to another with lower interest rates or better terms, though sometimes they also apply to other forms of debt, such as personal loans.

To transfer personal credit to business credit between cards, you must be approved for both cards involved in the transfer and typically have a good or excellent credit score.

The exact process varies by lender, though most balance transfers go through relatively quickly and easily. Ultimately, a balance transfer is a valuable strategy for managing and reducing your overall debt.

How Can Your Business Benefit From It?

There are many ways business owners can benefit from a balance transfer. Here’s why you should consider this strategy.

Lower Interest Rates

One of the most significant benefits of transferring a personal credit card balance to a business credit card is that it can help you save money on interest payments. If you have high-interest debt on your personal card, transferring your credit card balance to a business credit card with a lower APR can reduce your overall payments and get you out of debt more quickly.

In fact, even a slight difference in interest rates can significantly impact your bottom line. For example, let’s say you have $20,000 in credit card debt with an interest rate of 20%.

Over the course of a year, you would pay $4,000 in interest alone. However, if you were to transfer that balance to a business credit card with an APR of 15%, you would only end up paying $3,000 in interest over the year - saving $1,000.

Increased Spending Power

Another benefit of transferring personal credit to business credit is more spending power, because business credit cards often come with higher credit limits than personal cards.

So, if you have a personal credit card with a $5,000 limit and a business credit card with a $10,000 limit, transferring your balance to the business card will give you an extra $5,000 to work with. This can be helpful if you need to make a large purchase or cover unexpected business expenses.

Improved Credit Score

Another potential advantage of moving personal credit card balances to a business card is that it can help improve your credit score. The balance transfer will lower your overall credit utilization ratio - the amount of credit you're using compared to the amount you have available. For example, if you have a $20,000 limit and a balance of $15,000, your utilization ratio would be 75%.

Generally speaking, it’s best to keep your credit utilization ratio below 30%. So, if your utilization ratio is currently above 30%, a balance transfer could help you get it back down to a more manageable level. A lower utilization ratio is generally seen as being more favorable by lenders, so a balance transfer to a  business credit card could help you qualify for better interest rates and terms in the future.

Of course, there are other ways to lower your credit utilization ratio, like paying down your debt or increasing your credit limit on the current card. This is a quick and easy way of getting your ratio down to a more favorable level.

Things to be Aware Of

There are several things to be aware of when transferring a personal credit card balance to a business credit card. The most important considerations include interest rates, fees, and promotional offers.

First, consider the interest rate and how this will affect your business. Higher-spending businesses can sometimes negotiate lower interest rates on their business credit cards, so it's worth checking with your lender if this is an option. Additionally, make sure that the balance transfer fees don’t exceed the potential savings you may realize by switching to a new card.

Second, be aware of any promotional offers or other benefits that come with your new credit card. For example, some issuers offer cashback bonuses or travel rewards with eligible purchases, while others offer more flexible payment options to help manage cash flow throughout the month.

Before deciding whether to move balances between personal and business credit cards, it’s essential to evaluate these features carefully and determine whether they make sense for your particular needs.

Finally, remember that a balance transfer may impact your personal credit score: The transfer will appear as a new account on your credit report. Opening a new account can temporarily lower your credit score and affect your credit history, so keep this in mind if you're planning to apply for any new loans or lines of credit.

With these key factors in mind, moving your balances between cards can be a great way to save some money and improve your bottom line as a small business owner. So be sure to do your research and choose wisely!

Final Thoughts

There are many things to keep in mind when transferring a personal credit card balance to a business credit card. And although there are some potential benefits, it’s essential to weigh these carefully against any risks. As with any financial decision, be sure to do your research and consult with a qualified professional before making the final decision.

FAQ

Does a balance transfer mess up your credit?

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Transferring your balance from one credit card to another will not affect your score directly. However, if you close your old account, this could cause your score to drop.

Also, if you’re applying for a new credit card to transfer a personal balance to a business credit card, this will result in a hard inquiry on your credit report, which could also cause a dip in your score

Can I transfer a personal debt to an LLC?

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Yes, you can transfer a personal debt to an LLC. However, you’ll need to work with your lender to set this up, as it's not something that can be done automatically. Additionally, keep in mind that this could have implications for your personal credit score, so it's crucial to weigh the pros and cons carefully before making a decision.

Can a balance transfer be reversed?

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In most cases, once you’ve initiated a business credit card balance transfer, you cannot reverse it. Be sure to confirm all the details with your new credit card issuer before making the transfer. Once the transfer is complete, you'll have to make payments on the new account according to the terms and conditions of your agreement.

About author

Albert Einstein is said to have identified compound interest as mankind’s greatest invention. That story’s probably apocryphal, but it conveys a deep truth about the power of fiscal policy to change the world along with our daily lives. Civilization became possible only when Sumerians of the Bronze Age invented money. Today, economic issues influence every aspect of daily life. My job at Fortunly is an opportunity to analyze government policies and banking practices, sharing the results of my research in articles that can help you make better, smarter decisions for yourself and your family.

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