There are many options to consider when determining how to fund your business during the early stages of growth. For example, some choose to use credit cards to fund businesses.
This isn’t necessarily an ideal choice for everyone. You need to honestly evaluate the potential risks of funding a business this way.
However, if you do choose to go this route, it’s important to remember that a bank-issued credit card is by no means your only option. You can also choose to get a credit card from a local credit union.
There are several reasons to consider doing so. They include the following:
Banks have shareholders. Thus, they need to make profits. Every decision a bank makes must be in the best interests of its shareholders.
That’s not the case at credit unions. A credit union has no shareholders and operates on a not-for-profit basis.
This difference manifests itself in several key ways. For example, fees and interest rates for credit union credit cards tend to be lower than those of bank-issued credit cards. This can make a credit union credit card particularly appealing if you’re on a relatively tight budget.
Because credit unions aren’t for-profit businesses, but rather local institutions that exist to serve the community’s needs, they often offer superior customer service with a personal touch.
Their approach also tends to be more flexible than that of a major bank. For example, if you’re initially turned down when applying for a credit card with a credit union, often, you’ll have the option to ask the credit union to reconsider. This may be helpful if you know you’re prepared to use a credit card responsibly, but for various reasons, you’re not immediately approved for one. Typically, members of credit unions who have less-than-great credit find credit unions are more inclined to offer them access to credit than major banks may be.
Although this isn’t always the case, it’s not uncommon for credit unions to offer reduced rates or other promotional offers that a bank is unlikely to offer. This shouldn’t be the primary reason you choose to get a credit card with a credit union, but it’s certainly another perk worth knowing about. You can ask about these special offers when applying for a credit union credit card.
Factors to consider
Clearly, credit union credit cards offer major benefits. You simply need to be aware of certain realities before deciding this is the best way to fund your business. For example, when issuing credit cards, credit unions apply a “cross-collateralization” system. That means all accounts and loans are linked.
For example, perhaps you put up your vehicle as collateral when applying for a personal loan with a credit union. If, for whatever reason, you’re unable to make a credit card payment, your car could be repossessed to satisfy the debt, even though it was initially put up as collateral for another loan.
That’s not at all meant to discourage you from using a credit union credit card to help your business grow. Again, there are many reasons to choose this option. It’s simply always wise to be careful whenever you’re choosing a means of growing your business.