Your responsibility for paying your business credit card typically works much like it does with most other credit cards. So, if you can't pay your business credit card, it'll likely impact your business's financial wellbeing, and possibly your own. Let's investigate ways to stay on top of your business credit card payments and the potential consequences of missing payments.
Are you personally responsible for unpaid debt?
Generally, yes, but it may depend on the card you have. Mostbusiness credit cardsrequire a personal guarantee which puts payment accountability on the cardholder. This means that if you incur unpaid debt on your business credit card, you may potentially be held personally liable for repayment. Typically, cardmember agreements include personal guarantees as safeguards to help ensure credit card payments stay on course no matter what happens with the card providing business.
Note that while many business credit cards require a personal guarantee, some may not. Corporate cards, for instance, typically don't hold individual cardholders liable for the company's debts.
What happens when you don't pay your business credit card
You could face unwelcome results if you don't pay your business credit card bill on time. Consequences for business credit card default include:
- Late fees: You may incur late fees on your credit card bill after a late or missed payment. These can accumulate interest if left unpaid, because they are added to your outstanding principal balance
- Penalty interest rates: Credit cards may chargepenalty interest ratesif you don't fulfill your cardmember agreement and make timely payments. Higher APRs could also increase the principal balance on your business credit card.
- Credit score impact: Your credit issuer can report late and missed payments to the credit reporting agencies which could affect both your business and personal credit score.
- Collections: After a given series of missed payments, a credit card company may sell the associated account to a debt collection agency. This agency could then contact the account holder to collect payment. Collections may also show up on your credit report and have the potential to impact your score.
How to pay off your business credit card
You can kick off the process of paying your business credit card with a budget. It may help to familiarize yourself with your spending habits, debt and income sources as a starting point. After you've put this budget plan into practice, it may help to keep refining things like your spending habits on a regular basis.
How to take action if you can't pay your business credit card bill
There are a variety of ways to handle a credit card bill you can't pay. You may want to contact your card issuer to discuss potential options. The credit card company may offer you a payment plan or provide helpful information. Balance transfers might help move your debt to a lower-interest credit card, but they also typically charge fees worth being aware of.
In summary
If unexpected challenges arise and you can't pay your business credit card, there are steps you can take to avoid the potential consequences of missing payments. From crafting a budget to calling your card issuer to ask about payment plans, there are steps you could take to find a plan that works for you.
