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Credit Card Debt

Think about credit card debt like a revolving door. You can keep borrowing month after month as long as you repay your debt promptly so that you never go over your credit limit.

Unlike installment loans, which are closed once the sum is paid off, credit card accounts can be used continuously.
This form of debt is particularly dangerous, since it can quickly spiral out of control.

When the debt door keeps revolving, it can wreak havoc on your budget and credit score.

No matter your credit limit, it’s generally recommended that you don’t charge more than you can afford to return at the end of each month. When you don’t pay off your debt, you’ll be charged interest, which will accumulate until you do, causing you to fall further behind.

What Is Credit Card Debt?

Since first being introduced in the 1950s, credit card use has grown and alongside it, so has national debt.
Credit card debt is unsecured. That means it’s generally not anchored to a piece of property, like your car, or your house to serve as collateral if you don’t pay.
Even if you don’t pay off your credit card debt, it might hurt your credit score and history.
Not paying on time means you’ll accumulate debt.
What’s worse, if you keep refusing to pay month by month, you’ll gain interest on that debt (your rate depends on your bank, type of card and credit history).
The longer you take to pay off your debt, the more likely you will owe significantly more than you charged on your credit card.

Okay, so why are successful business owners being hit so hard with credit card debt?

The high credit card debt is actually a good crash course on how Canadians are spending their money.
Whether you’re an impulsive stress shopper or just investing beyond your means, credit card debt can affect your credit score, will cut into your cash flow, and costs you a ton of interest.
For early stage businesses, debt is an unfortunate reality.
Especially if you’re not working with advanced accounting software like QuickBooks.
A company venture typically uses debt funding, such as a business loan or a short-term loan, to cover the costs of its offices, workers, and the product or service it will provide. On the other hand, business debt can be generated by a variety of circumstances, including external influences, blunders, and negligence.

Many business owners are successful but credit card debt spiraling out of control. So what’s the solution?


It’s the number one key to managing credit card debt successfully.
As a business owner, covering your full credit payment each month will save you from getting annihilated by interest.
Even better, if you’re on top of your payments, your company can actually use cash flow to put aside a lump sum just in case you get a balance buildup on your company credit.

Staying Accountable

Are you feeling discouraged yet?
Don’t despair. You’re not the only one with debt struggles. It’s common, especially with newer business owners.
That’s why accounting and bookkeeping software like QuickBooks will set you a cut above the rest.
Every day, tens of huge sums are written off due to late payments and unpaid bills. Non-payment to businesses can snowball.
If you’re not on top of your debt, it becomes difficult to pay workers, buy inventory, or settle debts.
You won’t be able to invest in your employees, products, or services, and you’ll close yourself off from marketing to new audiences without this funding.
You’re also less likely to be supported by banks and lenders.
But I don’t have time to worry about my credit card debt.
That is why software like QuickBooks is very important.
They can connect to your accounts to quickly and easily organize all money going into and out of your business. You can also do everything from invoicing clients to paying vendors and more directly from QuickBooks.
Debts can also be caused by factors outside your control.
When the economy and specific markets are in poor health, customer spending tends to drop, resulting in lower revenues.
If you sell to or work with a niche market, you may be impacted by changes in consumer tastes.
Financial crises can cause interest rates to skyrocket. Banks don’t always love to be risk-takers in this case, and they may be more wary of lending to you.
Sadly, this type of circumstance will make it hard for your venture to hold its own against financially solid, revenue-generating medium-sized businesses.
The location of the business, high employee turnover, or even lawsuits, could also put a stop to earnings. Unexpected problems, such as criminal activity or extreme weather, can also have a cascading effect.

Among the other reasons are:

Credit Cards let you spend more
It’s simple: credit cards let you spend more than you earn. If you only pay cash for everything, your salary is the ultimate restriction on how much you can spend.
Credit Cards are great tools to map out your spending when you are paid, since credit card grace periods give you some flexibility in when you buy essential products in your business.
That being said, spending more than you earn is often what causes business-sinking debt. If you, like many of us have some, er, issues with lack of self-control, take the easier route. Accounting software like QuickBooks is a simple solution to monitor spending connected to your credit card.

Financial Emergencies

Uh oh.
Didn’t see that one coming.
When it comes to your finances, the unexpected can cause significant issues.
Sneaky expenses, like car repairs, tours or business seminars that you didn’t plan for can add up quickly.
Sometimes you just don’t have the cash up front.
Charging it to credit might seem like the easiest solution.
Instead, consider working towards having an emergency fund on hand.
Think of it as your top-secret escape route.
This type of fund can help avoid the debt trap that unforeseen financial issues can create. A 0% APR (annual percentage rate) credit card can help you avoid interest costs temporarily.
You’ll be able to avoid accumulating credit card debt that you can’t pay off right away if you have that savings buffer.

I own a business. How can credit card debt hurt me?

It’s been a hard month and you need to relax. You think to yourself, what’s one measly month with a delayed credit card payment?
Can’t be that bad, right?
It might seem appealing to default on your payments when you’re struggling financially. But as a business owner, you’re looking at a quick pileup of negative consequences.

Short Term Effects

You’ll see a lack of capital flows on the account associated with your credit card. Chances are, your bank of lender will deny new credit arrangements; this can have a direct effect on your business’s ability to acquire new inventory or productive assets.

Long Term Effects

If an agreement is concluded with your lender for a lesser amount than the original debt, your cost of debt will be lower than if you paid the debt on time, giving you an immediate boost in excess cash.
You may see a negative effect on cash reserves if you achieve a settlement with the lender that is more than the original debt amount after factoring in interest charges, fees, and penalties.
When your account goes into debt, your company’s credit score will suffer. That means future credit will be harder to secure. Your increased interest rates could skyrocket and you’ll see higher costs on future credit offers.
After a time of default, your lender may acquire a judicial judgment against your business. Because interest charges, fees, and penalties can be combined with court costs, lenders’ legal fees, and the original size of the debt, a judgment might cost your organization substantially more than a settlement. A court might seize any valuable assets, such as bank accounts and productive equipment to satisfy your business’s commitment. Fortunately, there’s no need to drive yourself into that kind of debt!


Like many of life’s indulgences, credit cards can be good or evil.
If you’re sensible, you can build your credit score by linking your cards to advanced accounting software like QuickBooks.
Set proper spending limits for your credit cards, and stick to them. Use your credit card exclusively for groceries or routine car maintenance, for example, which your budget should already cover.
As a business owner working with a very tight budget, a professional tool like QuickBooks will help analyze your business expenses and monitor your accounting to prevent credit card debts.
You deserve to be in the driver’s seat. Gain total control of your accounting and monitor how your credit card is being used to avoid debts and potential bankruptcy, QuickBooks Online is the best software to offer remarkable accounting and financial record-keeping purposes.
With inaccurate records, it’s impossible for your business to thrive or grow.
Inaccurate or disorganized business records will make investors or lenders run for the hills and can also make it harder to file your taxes. You may even get in trouble with the CRA.
Accounting software can feel clunky and hard to use, but a simple platform like QuickBooks will let even the least money-savvy owner handle their finances more easily.
Your money matters to us. Stay financially healthy and credit debt-free. Our Controller4Hire team would love to help you take care of your books. Start with our bookkeeping services, and watch your business grow. You may find you’re soon ready for our advisory stage services (Controller/CFO).

Agnes Nkundabagenzi, CMA, CPA can bring more stability,

value and reduced debt to your business across Canada.