What happens if I can't make a business credit card payment?

In an ideal world, you could always make payments with your business credit card, but the reality is that businesses sometimes face shaky cash flow, and many ultimately go under.

If your company is in trouble, business credit cardyou'll have to deal with late fees and high interest rates. And missing a business credit card payment can seriously damage your business credit score and your personal credit score, because nearly all business cards will report serious delinquencies to the consumer credit reporting agencies.

Refinancing your debt or taking advantage of a balance transfer business credit card can give you the luxury of paying off your balance without penalty if you act quickly when problems arise, but if the problem drags on and you don't pay off your debt, you may have to give up personal assets.

Why? Because, simply put, almost all business credit cards require a personal guarantee that if your company can't pay its invoices, you will.

A personal guarantee is like being a cosigner on a company's credit card. Ideally, the company will pay the bills, but if they don't, you have to. If the company closes or goes bankrupt, the business owner can be sued personally by credit card issuers over outstanding business card debt.

This gives credit card companies assurance that card bills will be paid no matter what happens to your business. After all, data from the U.S. Bureau of Labor Statistics shows that roughly half of small businesses go bankrupt within the first five years.

A personal guarantee on a credit card applies to all types of businesses, including limited liability companies (LLCs) and corporations. These businesses are generally protected from personal liability for business debts. A personal guarantee overrides the limited liability protection and gives the credit card issuer the express right to come to you in person for payment.

Personal guarantees are usually stated in the terms and conditions of the contract. Apply for a business credit cardThis is one of the reasons why you must provide your Social Security number: Issuers check your personal credit history to determine your likelihood of repaying the debt.

The terms and conditions attached to your application should state the personal guarantee. Look for words such as “personally liable” or a clause stating that you and your company are “personally and jointly” or “jointly” liable for all charges charged to your account.

Missing a business credit card payment can result in a series of penalties and consequences, the most serious of which is legal action against you and your company.

If you fail to pay your business credit card, there are several consequences:

• Late fees: Late fees on business credit cards are usually $40-50 or 2-3% of the past due amount, whichever is greater. Late fees are incurred if you don't pay the minimum amount by the due date.

• Penalty APR: Most card issuers will increase your interest rate after multiple late payments. Currently, penalty annual percentage rates (APRs) for business credit cards range from 29.99% to 33.65% and usually apply until you make six to 12 consecutive months of on-time payments. Regular interest rates for business credit cards typically range from 17.49% to 28.24%, depending on a variety of factors, including the card and your personal credit score.

• Low credit score: If payment is late, Business Credit Score Your personal credit score is also taken into consideration: Most card issuers report your activity (good and bad) to business credit bureaus. Business cards report activity to credit reporting agencies — But only if your payments are late. Late business credit card payments can lower your personal credit. Increase your credit score by up to 100 points.

• Debt Collection: Your card issuer will transfer your outstanding business debt to a collection agency. Note: You may still be charged interest by the collection agency.

• Litigation: You could be sued for outstanding business credit card debt. Because most business credit cards require a personal guarantee, the issuer could seize your personal assets to cover losses.

Ignoring business credit card debt will only make the problem worse. If you suspect a problem is coming up, take action immediately to minimize penalties and damage to your credit. Once a late payment appears on your personal credit report, most of these options are no longer available.

Transfer the outstanding balance To Balance transfer business card Over 12 to 18 months, you can slowly reduce your balance without paying interest. Self-employed people and business owners without employees can often find longer 0% terms on consumer credit cards. Just remember that if you miss a payment, you'll lose the 0% period and be assessed a penalty APR.

Refinance your debt with a small business loanwhich usually have lower interest rates than business credit cards. It can be hard to get a business loan, especially if your company is facing financial difficulties, so be proactive and Compare business loan options before your payments start to fall behind.

Contact your card issuer Contact us as soon as you realize you can't pay your bill. Your card issuer may be able to arrange payment for you and can tell you about any hardship programs that may be available to you.