The Biggest Credit Card Mistake Entrepreneurs Make. You Can Avoid It

Before pursuing your own business, make sure it's something you really love and will stick with, and draw up a smart, detailed business plan. fizkes/Shutterstock

By Odysseas Papadimitriou

More than 80 percent of small-business owners use credit cards, according to the Federal Reserve. But some make the mistake of reaching for plastic (means credit cards) too soon when starting up their businesses and reduce their chances for long-term success.

Nearly 60 percent of start-ups rely on credit cards for financing during their first year of business, according to a study from the Ewing Marion Kauffman Foundation, and for every $1,000 increase in credit card debt, a firm’s chances of survival decrease by more than two percent. The reason includes you might not have enough money to pay the credit card’s debts on time, and have to pay the high interests.

What’s So Problematic about Funding a Start-up with a Credit Card

It puts personal finances in jeopardy and increases stress. People often assume that small-business credit cards insulate the owner’s personal finances from the company’s. But that’s just not true. Whether you use a business or consumer card, you’re going to be personally liable for debt.