Enthusiastic entrepreneurs have great ideas to market a product or provide a service.


Counseling sessions with them often go really well until the entrepreneur decides it is time to bare his or her soul. Then comes a phrase heard too often from people otherwise eligible to start or expand a business: "I have bad credit."

How did that happen?

Often, the problem originates from credit card debt. As I've mentioned before, your personal financial life should be in order before you start a business. Using a personal cash flow, or budget, not only helps manage your home, but also provides practice for your business.

When you start a business, obtain a new credit card in the business name to avoid co-mingling personal and business expenses. Use your business credit card if you plan to pay the entire amount when the statement arrives each month. Avoid using it in place of a loan. Ask a bank or credit union for a line of credit or term loan.

Use the credit card instead of a debit card. If you have a debit card, lock it in the safe. If a credit card is lost or stolen, your responsibility is usually $50 or less, as long as you report its loss in a reasonable time. All or most debit cards do not have a protection limit. The entire balance of the account to which the debit card is linked is vulnerable.

Also, why use a debit card that removes money from your account instantly, when a credit card allows you to use someone else's money free for two to five weeks?

Periodically lay all your cards on the copier, copy front and back and file in a safe place. If the unthinkable happens to your wallet, you at least have a solid foundation from which to report to each card company and the three credit companies (Experian, Equifax and Transunion), and file a police report.

European credit cards contain an encrypted "smart chip" that stops most common credit card fraud. It may become available late next year in the United States. U.S. credit card companies currently use what Bloomberg BusinessWeek calls an "antiquated magnetic strip." To make matters worse, many U.S. cards issued recently have a radio frequency chip imbedded to speed up time at the register. A mere wave at a smart card reader at a retail store transmits the signal and completes a transaction. The problem is thieves can scan (steal) our information by wanding near our purse or pocket. Check your debit and credit cards. If you see a radio frequency emblem, keep these cards in a special frequency-blocking sleeve. Aluminum foil may help until you locate a real RFID-blocking sleeve.

Look for Part 2 of this column in two weeks: How credit card interest makes everything in your life cost more.
