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| Financing Your Small Business with Credit Cards is Riskier Than Ever |
| Monday, August 24,2009 09:15 PM |
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Great cautionary tale in the Los Angeles Times about the dangers of financing your small business with a credit card - whether with a business credit card or a personal one. Here's a frightening statistic:
For every $1,000 in unpaid credit card debt, a start-up business increases the probability that it will close by 2.2% on average compared with having no such debt, economics researcher Robert H. Scott said in a report released this month.
How many people are doing it in spite of the dangers?
...almost 6 out of 10, or 57.9%, of the nearly 5,000 firms in the study used credit card debt to get started.
The interest payments can be crippling, especially with the quick changes some credit card companies are making to fees and interest ... or outright cancellation of cards.
The negative effect is probably higher today because credit card interest rates and fees have climbed dramatically while credit limits have been chopped. Even mainstream card companies are charging rates of 30% or more in some cases.
Have you used your credit card to shore up your small business? Read the full article, then come back and let us know: http://www.latimes.com/business/la-fi-smallbiz18-2009aug18,0,2231646.story
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