What happens if you can't pay your business credit card?
Quick insights
- Many business credit cards have personal guarantees, which means the cardmember is personally accountable for paying off their balance.
- Failing to pay off your business credit card may result in consequences like late fees, penalty interest rates and more.
- If you are unable to pay off your business card, your card issuer may be able to provide payment plan options.
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. Below, we review some 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. Most business credit cards require a personal guarantee which puts payment accountability on the cardmember. 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.
Note that while many business credit cards require a personal guarantee, some may not. Corporate cards, for instance, typically don't hold individual cardmembers liable for the company's debts.
What happens when you don't pay your business credit card
Consequences for business credit card default may include:
- Late fees: You may incur late fees on your credit card bill after a late or missed payment.
- Higher interest rates: If you default on your credit card, you may be required to pay a higher interest rate.
- 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: If you miss multiple payments in a row, your credit card company may choose to sell your account to a debt collection agency.
How to pay off your business credit card
One way to begin the process of paying off your business credit card is by creating 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 allow you to move your debt to a lower-interest credit card, but there may be associated fees.
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.
