For business owners, 0% APR introductory offers on business credit cards can provide some much-needed financial flexibility. These promotional periods allow you to finance purchases interest-free for a set period, often 9-18 months. However, when that 0% APR window closes, any remaining balance is subject to the ongoing variable APR, which can be quite high – regularly over 20%. If you’re unable to pay off your debt before this intro rate expires, you’ll need to have a plan to manage that balance proactively. In this guide, we’ll explore strategies for prudently handling unpaid balances on 0% APR business cards once that teaser rate ends.
Develop a Payoff Plan
The first step in addressing an upcoming APR increase is creating a paydown schedule to eliminate the remaining balance as quickly as possible. Even though the interest-free grace period is over, you can still avoid paying excessive interest by aggressively paying off the balance over just a few months.
To illustrate, let’s say you have a $10,000 balance remaining on the Ink Business Cash® Credit Card when its 0% intro APR ends after 12 months. The ongoing variable APR will be between 18.49% – 24.49%. Here are some examples of payoff timelines and the total interest paid:
- 12 months at $920/month: $1,037 in interest
- 6 months at $1,785/month: $704 in interest
- 3 months at $3,468/month: $395 in interest
As you can see, stretching out payments over a year leads to over $1,000 in interest charges. Paying it off in just 3 months, while requiring higher monthly payments, cuts the interest paid by over 60%. Create a budget and payment schedule to pay as aggressively as possible.
READ ALSO: How to Leverage 0% APR Credit Cards as Interest-Free Loans for Major Purchases
Call to Negotiate a Lower Ongoing APR
Before that intro APR period expires, it’s also wise to call the card issuer to ask if they’re willing to offer a lower ongoing variable APR. Explain that you intend to pay off the remaining balance promptly, but a lower APR would be appreciated to minimize interest charges as a good customer.
Card issuers want to keep your business and may agree to a modest APR reduction, especially if you have an otherwise sterling payment history with them. Even shaving 1-2% off that variable APR can translate into meaningful interest savings.
Consider a Balance Transfer
If you won’t be able to pay off the full balance relatively quickly once the standard APR kicks in, another option is transferring the remaining balance to a new credit card with its own 0% intro APR offer.
There are plenty of great balance transfer options for business owners. For example, the U.S. Bank Business Platinum Card offers 0% intro APR for 18 billing cycles on balance transfers (with a 3% balance transfer fee). The PNC Visa Business Credit Card provides 0% APR for 13 billing cycles on balance transfers made in the first 90 days (also with a 3% fee).
While that 3% fee is an upfront cost, if it buys you 12-18 more months at 0% interest to pay down the debt, it can easily be worthwhile. Just be sure you have a solid plan for paying off the full balance during the new 0% APR period to avoid continually transferring balances.
For example, transferring that $10,000 balance with a 3% fee means paying $300 upfront. But if it allows you 18 months at 0% APR instead of 20%+ variable APR, you could save $1,700+ in interest by paying just $555/month.
READ ALSO: How Do I Owe Interest on a 0% APR Credit Card?
Leverage a Business Loan for Refinancing
Business loans can also provide an avenue for refinancing and consolidating high-interest credit card debt, often at lower rates than most cards charge. Depending on your creditworthiness, outstanding debt, annual revenue, and cash flow, you may be able to secure a term loan or line of credit to pay off balances on 0% APR business cards before higher rates are applied.
Some business owners use revenue-based financing, which provides an upfront lump sum that’s repaid as a percentage of future revenue. Compared to the 20%+ APRs on credit cards post-intro period, a business loan may provide much more affordable financing to tackle outstanding balances from 0% APR promotions.
The downside is that business loans do require a formal application, underwriting, and approval process. If your credit has been impacted by missed payments or high outstanding balances, you may not qualify for the most competitive loan terms and rates.
Adjust Your Credit Card Strategy
Once you’ve resolved the unpaid balance from a prior 0% APR offer, it’s wise to reevaluate your overall business credit card strategy and spending patterns. Racking up debt that can’t be repaid before pricing resets is counterproductive compared to just paying interest all along.
One approach is to only charge amounts you’re certain you can pay off during the 0% APR window. This preserves that interest-free loan, without letting balances linger into higher APRs.
Alternatively, you may want to simply stick with a low-APR business card without an intro 0% rate if you tend to carry balances. While you’ll pay interest from the start, at least it will be at a better guaranteed rate than the potential 20%+APRs that could kick in after a promo period.
The Blue Business® Plus Credit Card from American Express is a great example of a low-APR business card – it offers an introductory 0% for 12 months on purchases, then an ongoing rate of 18.49% – 26.49% Variable APR. If you don’t need a full 0% APR, paying that 18.49% floor rate could be better than letting a balance linger into higher penalty pricing.
Conclusion
While 0% APR promotions on business credit cards can provide very affordable short-term financing, they ultimately require disciplined paydown of balances before that teaser rate expires and resets to ongoing APRs over 20%. Having a plan to pay off any remaining balance through balance transfers, negotiating lower APRs, business loan refinancing, or aggressive payments can save you from excessive interest charges. Don’t let that 0% APR deal turn into a high-interest debt trap – be proactive about an unpaid balance strategy.
Frequently Asked Questions
What happens if I can’t pay off my 0% APR business credit card before the intro period ends?
If you have a remaining balance when the 0% APR introductory period on your business credit card ends, you’ll begin accruing interest charges at the normal Purchase APR rate, which is typically over 20%. To avoid high interest costs, you’ll want to pay off the remaining balance as quickly as possible or look into balance transfer options.
Can I negotiate a lower APR after the 0% intro period ends?
It’s possible to call your credit card issuer and ask if they’ll extend a lower APR rate, especially if you have a long, positive history with them and make efforts to pay off the remaining balance promptly. Success isn’t guaranteed, but calling and negotiating is worth a try.
How long is the typical 0% APR intro period on business credit cards?
Most 0% APR introductory rate periods on business credit cards range from 9-18 months. Common offers include 12 months at 0% or 0% for 15 billing cycles. Some consumer cards offer up to 21 months at 0% for individuals/sole proprietors.
What credit score is needed for a 0% APR business credit card?
You generally need good to excellent personal credit scores (680+) to qualify for 0% APR business credit card offers. The intro 0% APRs go to the most creditworthy applicants.
What fees come with balance transfers?
Most balance transfer offers for business credit cards charge a 3-5% balance transfer fee, which is deducted from your total credit limit. While an upfront cost, this fee provides additional interest-free payments to pay down balances.
In another related article, 0% APR Credit Cards for Home Renovations: A Smart Way to Finance Your Dream Home
