What affects the economy can also affect interest rates on your business credit card. Changes in your personal and business financial situation, including income, amount of debt and other factors can also affect interest rates.
Calculating business credit card finance charges
Some cards have a fixed Annual Percentage Rate (APR) and many credit card issuers are currently offering a variable APR that is tied to an index.
- If your APR is fixed: it will not vary with changes in an Index and most credit card issuers will use the Daily Periodic Rate (DPR) to calculate the finance charges you will see on your monthly credit card statement.
- If your APR is variable: your interest rate will vary with changes to the Index it is tied to (most commonly the U.S. Prime Rate.) Most credit card issuers calculate the variable rate using a formula that adds a margin they determine to the Index rate.
|Fixed interest rate example||Variable interest rate example|
|If your APR is 16.75%, divide it by 365 days in the year.||16.75% ÷ 365 = 0.00046||Your current margin is 13.5% and the current Index is 3.25% which makes your current APR.||13.5% + 3.25% = 16.75%|
|Multiply that by your average daily balance of $500.||0.00046 × $500 = $0.2295.||Divide your APR of 16.75% by 365 days in the year.||16.75% ÷ 365 = 0.00046|
|Multiply that by a 30-day billing cycle (e.g., 30).||$0.2295 × 30 = $6.88||Multiply that by your average daily balance of $500.||0.00046 × $500 = $0.2295|
|Multiply that by the number of days in the billing cycle (e.g., 30).||$0.2295 × 30 = $6.88|
This chart is for illustrative purposes only. Your APR and finance charges, and how they are calculated, may vary.
Avoid interest rate hikes
The finance charge you pay is largely determined by your interest rate, also referred to as your Annual Percentage Rate (APR). The APR on your account can adjust up or down over time from its initial point, for a number of reasons explained below.
Remember, you can pay more than the minimum amount due at any time. Paying your balance in full or making larger payments when possible can significantly reduce your cost of credit.
Economic & industry factors
Everything that affects the larger economy can also affect your business credit card interest rate. For instance, if the interest rate banks pay to borrow money changes, it may have an impact on your APR. On a variable rate account, the APRs will fluctuate with the index to which they are tied—most commonly, the Prime Rate.
Personal or business financial changes
Changes in your personal and/or business financial situation, including changes in your income, your amount of debt, your overall credit history and how you use and maintain your business credit card with us can all affect your interest rate. You should strive to maintain a good credit rating at all times.
Business Card Agreement changes
Over the life of your business credit card and business charge card account, we may make periodic changes to your Agreement, typically in a letter or a statement insert. Here's how it works:
- We will disclose any changes to your account before the changes take effect, and if an APR increase is included you may be given an opportunity to reject that portion of the amendment
- Not all APR amendments are granted an opportunity for rejection
- If you are provided the opportunity to reject an APR increase and you decide to do so, you will lose future charging privileges with your card but will be given the opportunity to pay off your existing balance at the current rate
Promotional rates expire
Promotional rates are special business credit card APRs that have a set expiration date.
- When they expire, your APR increases to the non-promotional rate
When taking advantage of a promotional offer, make sure you keep track of when the offer expires so you'll know when your APR increases to the non-promotional rate.
- Transaction Fee
- A fee that may be charged when making certain types of transactions with your business credit or charge card. It is usually a percentage of the total amount of the transaction. For instance, a transaction fee is often charged when you take a cash advance with your card.
- Debit card
- An optional card that Bank of America issues to checking customers that can be used anywhere Visa® or MasterCard® debit cards are accepted. The funds used are deducted directly from the customer's checking account. Debit cards can also be used to withdraw cash or make deposits at Bank of America ATMs.
- Online Banking
- Online banking lets you get account information and manage banking relationships all from a PC. Through Bank of America Online Banking, you can review all your Bank of America checking and savings accounts, credit and charge cards and other banking services such as a home loan or home equity product.
- A removal of funds from a checking or savings account.
- Cut-off Time
- It is generally the latest time of day specified by Bank of America after which a transaction will not be processed for that specific day. Processing won't always be completed on the day it starts. The cut-off time is usually before the banking center closes and varies by banking center. The cut-off time for an ATM is usually posted on the ATM. Cut-off Times for business credit and charge card payments are stated on your agreement and on your statement. Most cash deposits, cash withdrawals and transfers between Bank of America checking accounts made after Business Day Cut-off and before midnight will be included in the balance used to pay transactions. Exceptions apply. Visit www.bankofamerica.com/getmoretime for more information.
- Each business owner, authorized officer or other individual who signed, submitted or otherwise authenticated an application for a Business Credit or Charge Card. Guarantor(s) jointly, separately and unconditionally agree to pay for all obligations on the Card.
- Credit History
- Includes account types, remaining balances, payment status, collection information and inquiries. Credit bureaus collect and organize information about people who have credit. The information generally goes back seven to ten years. This report includes your name, address, employer, length of employment and previous credit history.
- Balance Transfer
- The act of transferring debt from one account to another. Typically done between credit cards to take advantage of a lower rate offer or to consolidate debt to lower monthly payments.
- Terms and conditions for use of a business credit or charge card and repayment of debt between the borrower and the Bank. A copy is provided when an account is opened, and may also be requested through our Customer Satisfaction department.
- Available Credit
- The amount of your credit line that is available for immediate use.
- Interest Rates
- Different types of accounts and loans pay or charge different rates of interest and are expressed as a rate per period of time. For example, the Interest Rate paid for funds held in an interest-bearing account, such as savings, CDs and some checking accounts. An Interest Rate can also refer to the rate charged on an outstanding balance on a loan or line of credit.
- Savings Accounts
- A banking account in which you place funds and receive interest for doing so. Savings accounts are FDIC insured to the maximum amount allowed by law. There are many savings options to choose from so that you can save the way you prefer.
- Account Balances
- For checking and savings accounts, your account balance is based on the funds put into your account (credits) and the funds taken out of your account (debits). We process debits and credits each business day. For credit and charge cards, it's the total amount owed on the account at a designated time, as reflected on your monthly statement.
- Posted Transactions
- When a transaction or item appears on your account statement, it is referred to as having "posted." Posted transactions have been processed by the Bank, but funds for the transaction may still be in transit. Unposted transactions have not yet been processed, but may affect the amount of credit available. See your Account Agreement for details.
- Available Balance
- Your Available Balance is the amount of funds in your checking or savings account that is currently available for you. It includes all Cleared and Processing transactions. Keep in mind that any transactions you have made but Bank of America has not yet received need to be subtracted from your Available Balance for you to know the exact amount of funds you have to spend or withdraw. The Available Balance does not include:
- Any transaction that has not been received by the bank (check, recurring Debit Card transactions, ACH)
- Amount of a deposit not currently available, including holds
- Debit Card transactions identified as Authorized
- Direct Deposits
- Direct Deposit is a service that automatically transfers your recurring deposits to your checking or savings account. Recurring deposits can include: salary, pension, Social Security and Supplemental Income (SSI) benefits, or other regular monthly income.
- Account Statements
- A printed or online statement for a checking, savings, credit, or charge card account detailing all the debit and credit transactions for a given statement cycle.
- Finance Charges
- The finance charge is the interest plus certain transaction fees charged on your credit card account.
- Minimum Daily Balance
- This term relates to checking and savings accounts. To determine the Minimum Daily Balance, we look at the lowest daily balance you had in your checking or savings account during a statement cycle. For many of our accounts, we use the Minimum Daily Balance to determine whether a monthly maintenance fee will be charged to your account.
- An account is overdrawn when it has been drawn on in excess of available funds.
- A hold is a delay in the availability of funds you have deposited into your checking or savings account. When Bank of America places a hold on your deposit, you will not be able to use the funds until the hold expires. Holds occur infrequently and if you receive one, you will receive a notice with the reason and the date the funds will be available. A check may be held for several reasons: The check is for an amount larger than you normally deposit; the source of the check; we suspect that we cannot collect the funds from the account the check is drawn on; or there have been previous overdrafts from this account.
- Checking Account
- A banking account in which you place funds and withdraw available funds on demand, typically by using a debit card or writing a check. Checking accounts are FDIC insured to the maximum amount allowed by law. There are checking account options to choose from so that you can bank the way you prefer.
- Annual Percentage Rate
- The yearly rate of interest. The APR is listed in the account agreement as well as on monthly billing statements.
- U.S. Prime Rate
- The U.S. Prime Rate is the prime lending rate offered by a number of the country's largest banks. It is frequently cited as a standard for general interest-rate levels in the economy. The U.S. Prime Rate is often used to calculate variable interest rates. A set number, or margin, determined by the issuer, is added to the U.S. Prime Rate to get the variable interest rate. When the Prime Rate goes up or down, the variable rate may change.
- Average Daily Balance
- For checking and savings accounts, it is the sum of the daily account balances during a period, usually a monthly statement cycle, divided by the number of days in the period. For credit card accounts, it is the balance subject to finance charge that calculates the balance for each day during the statement cycle. The average daily balance is determined by adding up the daily balances, then dividing them by the number of days in the cycle.
- Promotional Rates
- A rate that is lower than your standard interest rate and is valid only for certain transactions for a limited period of time.
- Grace Period
- A grace period is basically an interest-free period between the time of a purchase and the payment due date shown on your next statement. Cash advances generally do not have a grace period. There is no grace period for payments; payments are due no later than the payment due date. See your Agreement for how the grace period on your credit card account applies.
- Cash Advance
- Transaction to access cash from a credit and charge card account. Cash advances can be made using an ATM, at a bank, by phone or through a credit and charge card cash advance check. Cash advances are not available on all products.
- Unsecured Line of Credit
- A line of credit is an account under which you may access funds up to an agreed upon maximum. Interest is only charged on the funds that are actually withdrawn from the line of credit. With an unsecured line of credit, the bank does not hold any of the borrower's property as collateral.