Play Your Cards Right

Todd Dills | January 04, 2011

Small-business credit cards, because they are not covered under the 2009 Credit Card Act, lack the act’s consumer protections and therefore offer more profit potential for credit card companies. So as the companies aggressively market those cards, they’re offering big benefits to small businesses with excellent credit, from cash-back schemes to travel miles and points programs.

Capital One’s Business Platinum series offers businesses with credit at least equivalent to a 760 score either 1 percent cash back on all purchases or 3 travel miles for every dollar spent in a particular category. The cash-back card would return $600 yearly on $60,000 in fuel purchases using the example above. Choosing the miles version of the card, however, would net an operator 180,000 travel miles, worth a reward potential of up to $1,800 worth in airline tickets.

Such rewards are at best an ancillary benefit to an otherwise sound approach to cash flow. When using credit cards to charge for fuel and maintenance expenses, paying bills off before interest accrues is key. Otherwise you run the risk of digging yourself a deep costly hole.

“Those charging up the credit card stopping at the chrome shop ­— when business gets rough and times get tough … those are the folks who’ve exited the business.” — Driver and ex-owner-operator Paul Todorovich

In December 2008, California-based Marten Transport leased owner-operator Thomas Blomberg jumped at an offer of a one-year no-interest introductory period on a $26,000 credit line with a Bank of America-issued card. He needed the credit for an in-frame on his 2003 Freightliner Columbia. Over the next year, as his miles decreased with the reduction in long-haul freight, he was unable to pay the nearly $20,000 bill off before interest began accruing.

“I’m in a big hole with Bank of America,” he says. “I’ll be paying for this for years and years on the interest.”

As an owner-operator, Todorovich “used a credit card only when I was far away from home and needed a repair.” He’d spend the following 30 days running as hard as he could to pay the bill before interest charges kicked in.

He hasn’t paid a dime of interest since 2004, when his previous truck was paid off, he says. “If I don’t have the money, I don’t buy it.”

Even prior to the recession, 10 percent of all owner-operators, according to Overdrive research, considered balances on their credit cards to be too high and difficult to manage.

Greenwell estimates he charged $3,000 on his first credit card after his heart attack. Making only the minimum payment once he got back on the road, he found his balance barely changed from month to month because of a high interest rate. “I got the rate reduced to 7 percent when I closed the account, finally,” he says. “Now I’m paying about $150 a month” toward gaining zero balance.

He adds, “I don’t ever want another credit card. If you can’t pay cash for what you’ve got to buy, you don’t need to have it.”

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