Business Banking

5 shocking statistics about business credit debt

In this article, we pick out 5 of the most shocking statistics about credit debt. We also explain why businesses need credit and how to avoid business debt whenever necessary.

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There are 31.7 million small businesses in the U.S., according to the SBA. Of these, 67% have at least one business credit card. 24% use their card as the primary method of business spending, carving into $4 trillion worth of card credit that’s available in the U.S. economy.

In this article, we pick out 5 of the most shocking statistics about credit debt. We also explain why businesses need credit and how to avoid business debt whenever necessary.

Why businesses need credit

Businesses, large and small, rely on credit to meet regular operational costs and stay afloat. This is particularly necessary when profits are low and cash flow is taking a hit. Additionally, a business may use credit to improve its credit history. Here’s the top seven reasons why businesses need credit:

  • Meet minimum business expenses
  • Solve cash flow problems to pay for employees, suppliers, and creditors
  • Purchase inventory for seasonal businesses
  • To help purchase business equipment
  • Expand on current business operations and grow your business
  • Build business credit and improve business credit score
  • Save on business taxes




5 statistics about business credit debt

Small businesses need credit for many reasons, and credit debt is more common than you’d think.  Here are a few shocking statistics about credit debt:

1. 67% of small businesses use credit cards

Two-thirds of small businesses in the U.S. have a company credit card, according to Forbes. With 31.7 million small businesses in the country, this brings the total number of business credit cards to over 21 million. Of these companies, 24% use their credit card as the primary method of business spending, thus actively using part of the $4 trillion worth of card credit that’s available in the U.S. economy.

2. Business credit debt hits $50 billion

Combined, businesses have $50 billion worth of outstanding credit card debt. This is about 5.7% of the total credit card debt ($870 billion) in the U.S. economy. (Un)surprisingly, the poorest card holders hold the highest credit card debts. This underscores the biggest downside of credit – without discipline, it’s easy to sink your business into debt. Should you find your business in constant debt, then here’s how to avoid business debt:

  • Rework your budget to match your income
  • Pay with cash and only turn to credit as a last resort
  • Reduce business expenses
  • Speak with creditors to extend your credit repayment period
  • Create a realistic debt repayment plan
  • Increase income by targeting more customers

Want to know how to reach new customers? Check out this detailed guide.

3. The average APR for business credit cards is 19.71%

While the average APR for consumer credit cards is 14.52%, business cards charge a higher interest rate of 19.71%. The rate is even higher for travel rewards cards (20.56%). However, your business can qualify for lower interest rates. Here’s how to get a lower APR on a business credit card:

  • Improve your business credit score
  • Apply for a low interest credit card or low APR card
  • Get a balance transfer card that has 0% introductory offer
  • Call your card issuer and request for a lower rate

4. Small businesses spend 1 in every 6 dollars spent on credit cards

The total credit card spending in the U.S. is $893 billion. Of this, close to $150 is attributable to small businesses, bringing the ratio to one in every six dollars. Shockingly, only 29% of small businesses actually use their credit card rewards to pay for business expenses, according to Forbes. As a business owner, it makes a lot of sense for you to use these rewards. They cover certain business expenses (like travel costs) thus freeing up funds for other bills and purchases.

5. Businesses feel lower levels of trust and loyalty towards their credit card issuers

Before the coronavirus pandemic, business credit card customers had a satisfaction level of 849 out of 1,000. The value has since dropped to 840, according to J.D. Power. Most business owners say that they have lower levels of trust and loyalty to their card issuers now more than pre-COVID-19.

25% of business owners are spending less with their credit cards. Additionally, 29% say that their businesses are worse off now because of direct effects of the coronavirus pandemic. And while 71% acknowledge that their card issuers are trying to help, they insist that card companies can and should be doing much better than they are to help small businesses. Perhaps the biggest takeaway here is that credit card companies are not exactly reliable, particularly for small businesses.

Final thoughts

Owning a small business is tough, and leaning into loans and credit cards is often essential to maintaining good cash flow. It isn’t always realistic to have a perfect credit score or a debtless business. When investing in financial products for your company, look for a provider who offers transparent and fair pricing on their products. 


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