How to do a balance transfer for a business credit card

Summary

• A business credit card balance transfer may help reduce interest costs and improve cash flow if used strategically.
• Approval typically involves a hard inquiry on your personal credit report and may require a personal guarantee.
• Balance transfer fees, promotional APR periods and standard APR rates are key terms to review before applying.
• Creating a repayment plan helps ensure the transferred balance is paid off before the introductory APR period ends.
• The balance transfer process usually involves finding an offer, applying for a card, initiating the transfer and monitoring both accounts.

Business credit cards can help you manage expenses, track spending and access short-term financing — all important steps in building a business. But if the balance gets unwieldy, you might decide to transfer it to another credit card.

Transferring a balance from one business card to another isn't difficult, but you do want to make sure it's the right move for you financially. Let's look at the factors to weigh beforehand and the steps involved to help you decide if a balance transfer makes sense for your business.

What to consider before a business credit card balance transfer

The goal of a balance transfer is usually to pay down debt faster while maintaining cash flow. Thinking through these factors first may help you avoid surprises and ensure the transfer improves your business's financial position.

Credit score

A balance transfer often involves applying for a new credit card with a lower interest rate, preferably one with a low intro annual percentage rate (APR). That promotional rate could help you pay down your balance faster because more of each payment goes toward the principal rather than interest.

However, business credit card applications usually trigger a hard inquiry on your personal credit report, which can cause a temporary dip in your credit score.

Business credit cards may affect your personal credit in other ways. For example, a large balance transfer could use a higher percentage of the new card's limit, increasing your credit utilization and potentially lowering your credit score. On the other hand, if the new card has a higher limit, a transfer could improve your utilization.

How much you need to transfer

The balance transfer amount can affect costs, repayment plans — and sometimes whether you can transfer the entire balance at all.

Some business credit cards limit transfers to a percentage of the card's credit limit. If the balance exceeds those limits, part of it may remain on your original card and continue to accrue interest.

Business cards may also charge a balance transfer fee of 3% to 5% of the amount transferred. That fee is usually added to your new credit card balance, increasing the total amount you'll need to repay.

Perhaps the most important factor is whether you can repay the balance during the introductory low APR period. If the balance is too large to pay before the end of the promotional period, the remaining balance may begin accruing interest at the card's standard APR.

Thinking through the transfer amount helps make sure the move reduces interest costs and supports your repayment strategy, rather than simply shifting the debt from one account to another.

Offer terms

If you plan to get a balance transfer credit card, review the offer terms closely. Here are a few to focus on:

• Balance transfer fees: Weighing the potential fee against the interest saved could help you decide if the transfer makes financial sense.
• Promotional period: A longer promotional period gives more time to pay off the balance before the standard APR applies.
• Standard APR: Knowing the standard APR can help you estimate the potential costs of not paying your balance before the end of the promotional period.
• Transfer eligibility rules: Some credit card providers don't allow transfers from cards they've issued or certain types of accounts. Checking these rules can help prevent delays or rejected transfers.
• Transfer deadlines: Promotional offers sometimes require balance transfers to be completed within a specific timeframe to qualify for the introductory APR.

Reviewing these and other terms can help you determine whether a balance transfer reduces costs and supports your business's cash flow.

Having a repayment plan

A plan for paying off the transferred balance before the introductory APR ends is key to making a balance transfer work. Without one, you're just exchanging one debt for another.

Here are a few tips for making a balance transfer repayment plan:

• Calculate a monthly payment target. Divide the transfer amount by the number of months in the promotional period to estimate how much you should pay each month.
• Set up automatic payments. Scheduling your payments automatically can help you stay on track. Just make sure the linked account always has enough funds to cover the payment.
• Avoid new purchases. Adding new charges to the card can increase your balance and make it harder to pay off the transferred amount.
• Consider keeping your original card open. Closing an older credit account may affect the average age of your credit history, which is one factor used in credit scoring models.

Steps to take for a business credit card balance transfer

If you've decided a balance transfer is the right move for your business, the following steps can help guide you through the process.

Find a balance transfer offer

Start by researching business credit card balance transfer offers. You'll likely find plenty of options, but the best one for your business gives you a reasonable chance of approval while also having terms that fit your needs.

Credit card applications typically require a hard inquiry, and multiple inquiries could affect your credit score. Focusing on cards that fit your credit profile may help limit unnecessary applications while you compare offer terms.

Apply for your new business credit card

Once you've chosen a business credit card, you can usually apply online if you have the following information ready:

• Business name and address
• Type of business
• Tax identification number (Sole proprietors may be able to use their Social Security number.)
• Annual business revenue
• Age of business
• Number of employees

Keep in mind that applying for a business credit card often involves a personal guarantee, which makes you responsible for any unpaid balances.

Initiate the balance transfer

Depending on the credit card provider, you may be able to request a transfer after you've been approved. That typically means providing details about the account you want to pay off, like the card provider's name, account number and the amount you want to transfer.

Monitor your accounts

Processing your request may take several days — or even a few weeks. During that time, you're still responsible for making payments on the original card.

After the transfer posts, confirm the amount and begin making payments based on your repayment plan. Be sure to account for any balance transfer fee. Most providers add it to the transferred balance.

Using a balance transfer strategically

A balance transfer on a business credit card may be easy to initiate, but it still requires careful planning. Understanding how a transfer might impact your business finances and personal credit can help you decide if it's the right move for you. If you proceed, pairing the transfer with a clear repayment plan can help you reduce interest costs and keep your balance moving in the right direction.

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