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Your Guide to Using a 0% APR Credit Card for Your Restaurant

by

Eric Goldschein

There are lots of options available for restaurant owners with ongoing financial needs. You might consider a loan, a line of credit, or maybe you’re lucky enough to pull in some additional equity financing from a group of investors

An overlooked tool in the restaurant financing arsenal, however, is the business credit card. If you qualify for a 0% APR credit card, that can be even more helpful than the resources mentioned above.

Why?

A few reasons: 

  • There are few businesses where cash flow is more uneven than a restaurant. Even the best-laid budgets can go awry when equipment malfunctions. 
  • Restaurants regularly need to cover some major overhead costs. Whether it’s a new fridge or an extra hand in the kitchen, restaurants spend a lot to keep things running. 
  • In some cases, you can use them to pay off existing debt. If you’ve racked up purchases on another credit card, some credit card issuers (meaning the bank or credit union that offers you the credit card) allow you to do a “balance transfer” and bring your existing debt onto your new card, with your new APR (annual percentage rate). 

Here’s a rundown on how to use a 0% APR credit card for your restaurant – from how to get one, to how it works, to how to make the most out of one for your restaurant financing needs. 

The Basics of a 0% Intro APR Credit Card 

You’re familiar with the concept of a credit card, no doubt. You use it like a line of credit, making purchases that you’ll pay off at a later time. There are different types of credit cards out there – like personal, travel, and business. 

In general, it’s important to have a credit card specifically for your business needs. You shouldn’t use your personal card to make business expenses (mixing business and personal finances is a bad call for many reasons, both legal and financial), and many business credit cards come with business-specific benefits, such as cash back on office supplies and Internet services. 

Some business credit cards come with this unique and powerful perk: an introductory period, typically between 7 to 12 months, with a 0% APR on your purchases (provided you make your minimum monthly payments). Typically, if you carry a balance on your credit card from one month to the next, you’re penalized in the form of interest fees. But with a 0% APR card, you can carry that balance without penalty, freeing you up to pay off big purchases on a less constricted schedule. 

This means you’ll have access to an interest-free loan through the life of your offer. No other business loan product – a bank loan, an SBA loan, or anything else – can match that. 

Once the offer ends, your APR sets in at a rate is based on both your creditworthiness and the market Prime Rate. So no matter what card you go with, check the credit card issuer’s terms and conditions for the latest APR information. At this point, it becomes a “regular” business credit card, with all the perks and benefits that card boasts – along with regular interest fees you’ll have to pay if you don’t pay off your balance in full each month.  

How Do You Qualify for a 0% APR Credit Card?

The truth is, not every business owner will qualify for such a valuable benefit – at least not right away. 

Restaurant staff using a laptop on a counter

Most elite business credit cards require the business owner to have a good-to-excellent personal credit score. A minimum credit score of 700 is a common requirement. It’s rare that credit card issuers will consider someone with a score below 660. 

Credit card issuers also consider any delinquencies or derogatory marks on your credit as strikes against your case for qualifying. 

In some cases, the issuer may consider factors like annual revenue and number of employees, but the biggest variables by far are credit score and evidence of delinquencies or derogatory marks. 

What to Do If You Don’t Qualify

If for whatever reason your credit score or credit history prevents you from qualifying for a card with a 0% introductory APR, all is not lost. It’s just time to start building up your credit to the point where you do qualify. 

Look for a credit card on offer for people with bad-to-average credit, such as a secured credit card. Secured credit cards require a refundable deposit, which you essentially borrow against each time you use it. This allows you to build credit as you work towards a better credit card product – and let you build some good spending habits! 

Also, be sure to look over your credit report and make sure there aren’t any errors by the credit bureaus or past vendors weighing down your credit score. Regularly reviewing your report is good financial practice, and doing so may save you crucial points on your score when it comes time to apply for a card. 

The Advantages and Drawbacks of 0% APR Credit Cards

From the way we’ve described these types of credit cards, you might not think there’s a better tool to have in your financial arsenal. And to be fair, they are great business credit cards. 

That being said, you should understand exactly what a card like this can do for your business – and how it can hurt you, if you’re not careful. 

The Advantages

Here’s why a 0% introductory APR credit card is a good choice for you as a restaurant owner: 

  • You are no interest fees assessed to your purchases throughout the life of the offer.
  • Some credit card issuers allow you to perform balance transfers during your introductory period, allowing you to pay off debt accumulated from other cards at 0% interest.
  • Unlike a loan, with a credit card you borrow just what you need when making purchases, and not a cent more.
  • Though you’ll need good personal credit to qualify for one, the credit card issuer won’t review your business credit score – which means that even new restaurant owners can obtain an elite business credit card.

The Drawbacks

These credit cards are not one-size-fits-all products. Keep the following risks in mind when applying for and using one: 

  • Your post-introductory APR may be higher than what you would get from an affordable small business loan, so make sure you pay off all of your purchases before your offer ends. 
  • You can’t put every expense on your credit card – expanding your restaurant into the space next door will require significant capital, likely in the form of a business loan or line of credit, which will come with interest and other fees.  
  • Certain cards may not have the best or most relevant perks for your business in the long-term (others may give you more cash back, or reward points for certain categories), so there are other cards you might get in tandem with, or in lieu of, a 0% APR card. 

The Five Top Tips for Using a 0% APR Credit Card

Considering all we’ve discussed, it should be clear by now that while a 0% APR credit card is an excellent tool, it shouldn’t necessarily be your one and only restaurant credit card. There’s a time and a place for using it. 

But if you decide these credit cards are right for your business, you’ll want to make the most out of that interest-free period!

Here are tips on how to get the most out of your card:

1. Be Ready to Put It to Good Use

The last thing you want to do is qualify for a 0% APR period and leave the card in your wallet, unused. You’ve gotten your hands on a free loan – use it! 

If you foresee a large expense in your near future (like the need to replace an old piece of kitchen equipment), plan to apply for the card just ahead of it. If you don’t see an immediate need, hold off until a period you know you’ll use it. Wait until the getting is good. 

2. Pay Your Minimum Balance Every Month

The terms of your agreement will still require you to make minimum monthly payments on your purchases. You won’t have to pay off the purchase entirely, or pay interest fees, but you will need to pay something

If you forget to pay your minimum, your credit score will get dinged and you risk losing your 0% introductory offer! Consider setting up auto-pay so you can set it and forget it. 

3. Find a Card That Aligns with Your Habits

Not every 0% APR credit card is alike. Some credit card issuers give you a greater cash back percentage on certain categories (such as gas or phone services), while others are more generous with their sign-up bonus. 

If your card benefits don’t align with how you typically spend money after your introductory period ends, consider applying for another card that can help you get more for your money. 

4. Don’t Max out Your Card During This Period

One of the biggest factors that go into determining your business or personal credit score is your credit utilization ratio. 

What’s a credit utilization ratio? Let’s say your restaurant is undergoing some repairs and requires about $30,000 worth of work. Your credit card limit is $30,000, so you think, “Well, that worked out,” put the bill on your card, and have 11 months to pay it off. All good, right? 

In reality, you’re now at 100% credit utilization (assuming you have no other lines of credit), which is a major red flag to business lenders. Try to take out a loan at this point to finance more repairs, and you’ll probably get denied. Your business credit score will suffer. And to top it off, you’ll have maxed out your credit – you won’t be able to pick up even a tablecloth with that card

Any credit utilization ratio over 30% can lead to dings on your credit score. If possible, keep your ratio low – or do your best to pay off the excess balance you do carry quickly.   

5. Remember: It’s Only Useful to Those Who Carry a Balance

Some business owners are hesitant to use any kind of credit card, and many that do insist on paying off their balance in full each month.

Paying off your entire balance – not just your minimum – every month is an excellent business practice. But if you can do that with ease every month, you don’t need a 0% APR card, since you won’t collect interest fees anyway. Those who expect to carry a balance (after making a major purchase that will take time to pay off, for example) will reap more benefits here, as they’ll avoid racking up fees that come with carrying balances month-to-month. 

If you don’t carry a balance and don’t see the need to, look instead for a card with different perks and benefits that are a better fit for how to spend your money. 

The Bottom Line 

Restaurant owners have a multitude of financing products available to them if they need help covering a payroll gap, expanding their offerings, investing in new technologies, or making improvements to the back of the house. Almost every one of them will require either making interest payments on a loan product of some kind, or giving up equity in the business in exchange for cash. 

There’s one exception, and it’s the business credit card with a 0% introductory APR. Even if you only get your hands on this opportunity for seven billing cycles (though many options go up to a year’s worth), this is an opportunity you shouldn’t pass up if you qualify. And if you don’t qualify, you should work towards being able to do so. 

The restaurant business is hard enough. By giving yourself longer repayment terms, for free, you make your mission of running a successful restaurant that much easier – and that can make all the difference.


Eric Goldschein is an editor and writer at Fundera, a marketplace for small business financial solutions, such as business loans. He covers entrepreneurship, small business trends, finance, and marketing.

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