YOU ASKED: Is it better to pay o a credit card first or pay a manufacturer first?
WE ANSWER: This decision can significantly impact your business’s financial health. Here’s a strategic approach.
Prioritize Credit Card Debt. Credit cards often carry higher interest rates compared to other debts, making them more expensive over time. Prioritizing their repayment can save you significant money in interest charges. Aim to pay o these balances as quickly as possible to minimize costs and improve your credit score, which is crucial for maintaining financial flexibility.
Negotiate. Manufacturers may o er more flexible payment terms. Negotiate a plan with them that allows you to make smaller, more manageable payments.
Why This Strategy?
1. Reduce Costly Debt: High-interest rates on credit cards can quickly increase your debt. Paying these o first reduces the most expensive debt.
2. Maintain Business Relationships: By keeping manufacturers informed and negotiating payment terms, you preserve essential business relationships and ensure a steady supply of necessary products.
3. Cash Flow Management: Resources are freed up to handle other financial obligations without compromising your operational needs. To implement this strategy assess your financial position to understand fully which debts are costing you the most. Then communicate proactively with manufacturers to explain your strategy, ensuring they understand your intent to keep your account in good standing. Finally, set up a structured payment plan for your credit card debt to eliminate it as quickly as possible, using any available cash flow after essential expenses.
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