Charge it

Saying the words “charge it” has become an increasingly common practice among small businesses, according a Federal Reserve Report released yesterday.

Eighty-three percent of small businesses, defined by the Fed as those with no more than 50 employees, use credit cards in the normal course of business, the report found, about 64 percent of which were specifically small business cards, compared to 37 percent in 1998.

The size of the small business credit card market more than tripled since 2002 for Visa and MasterCard holders, with spending reaching about $150 billion in 2008. That figure however is a drop in the bucket compared to the $2 trillion in spending on Visa and MasterCard consumer credit cards.

The full report can be read here.

But despite the rise in use and struggling economy, the report concluded that small businesses are relatively responsible users of credit cards. Most small business pay their balance in full each month, with only 18 percent actually borrowing on their cards for more than the single billing cycle.

Credit card debt also represents only a small percentage of total debt held by small businesses.

Use of credit cards by small businesses peaked in 2007 and was followed by a sharp drop off beginning in 2008, in correlation with the recession.

The recession hasn’t stopped small firms from seeking new forms of credit.

About 20 percent of small businesses attempted to obtain a new credit card in 2009. Nearly three-fourths of those applicants were successful in getting a card. That’s compared to the one-third of small business applicants that were approved for a line of credit or about one half of applicants that were approved for bank loans in 2009.

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