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"WalletHub" featured Lubin School of Business Professor Edmund H. Mantell in "Ask the Experts: Business Credit Cards"

11/06/2019

"WalletHub" featured Lubin School of Business Professor Edmund H. Mantell in "Ask the Experts: Business Credit Cards"

How important are credit cards to small business owners?

Credit cards can be vital to the survival and profitability of a small business. Many small businesses require access to virtually instantaneous liquidity; either to exploit a potentially profitable business opportunity or to satisfy a demanding creditor. A credit card can provide that kind of liquidity.

What are the best ways to use a business credit card?

The best ways for a small business to use a credit card are to finance reasonably modest short-term purchases of goods or services, or to finance periodic purchases of reasonably modest amounts. The main thing to remember is that when a business (or an individual) makes a purchase financed by a credit card, the user is incurring debt. That debt should be discharged fully at the end of the posting period, usually the end of the month. The business (and the individual) should try to avoid compound interest charges on unpaid balances.

Why use a business credit card for business instead of a personal card?

There are at least three reasons why a business should use a credit card issued directly to the business instead of a personal credit card issued to the owner of the businesses:

  1. The dollar amount of the interest (if any) paid by a business on debt directly related to the operations of business can shield some of the profits of the business against Federal Income Tax liability. The shield means the business will pay smaller Federal Income Taxes.
  2. In order to exploit the tax shield, the business taxpayer must distinguish between those interest charges directly attributable to the debt incurred by the business and those interest charges which are not. A business credit card facilitates that accounting attribution.
  3. Generally speaking, it is unwise to mingle business expenditures with non-business expenditures on a personal credit card. Such a mingling will make it more difficult to prepare accurate financial statements for the business, such as a statement of net income or a balance sheet. Those statements must be accurate to enable the owners of the business to assess its profitability.

Does a company need to be incorporated to get a business credit card?

Not necessarily. Different banks (and other institutions) define their own criteria for the issuance of a business credit card. However, it might be prudent to incorporate a business, for several reasons. The small business owner contemplating the acquisition of a business credit card should shop around.

Read the WalletHub article.

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"WalletHub" featured Professor Edmund H. Mantell's piece about international credit cards in "Ask the Experts"

05/14/2019

"WalletHub" featured Professor Edmund H. Mantell's piece about international credit cards in "Ask the Experts"

What’s the most important thing to look for in a credit card for international travel?

The single most important thing to look for in a credit card for international travel is universality of acceptance as a medium of payment for goods and services in the foreign countries the traveler visits. If a credit card does not have purchasing power in a foreign country, it is useless to the traveler in that country.

What’s the biggest credit card mistake that international travelers make?

The single biggest credit card mistake that international travelers make is forgetting (or consciously omitting) to convert a price denominated in a foreign currency (e.g. Euros) into the counterpart price denominated in the home currency (e.g. dollars.) It is easy to avoid that mistake if the traveler carries a cell phone with reliable internet access. If the contemplated purchase (not yet consummated) is significant, the traveler should check out the spot exchange rate between the local currency and the home currency before the transaction is executed.

Would you ever recommend getting an American Express or Discover credit card for international travel?

I would recommend an American Express card. I believe it to be widely recognized and accepted by merchants in most civilized countries.

Do you know of any international destinations where a U.S. credit card will not work?

Any international region where the local banking institutions do not have international banking relationships with U.S. banks is problematical. For example, Venezuela or Zimbabwe or North Korea.

Read the article.

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"WalletHub" featured Pace University's Lubin School of Business Professor Edmund H. Mantell in "Student Credit Cards with No Credit"

10/26/2018

"WalletHub" featured Pace University's Lubin School of Business Professor Edmund H. Mantell in "Student Credit Cards with No Credit"

You can get all of the following student credit cards with no credit. Credit card companies actually roll out the red carpet for students despite their lack of credit history (some offers are from WalletHub partners). They do this because of students’ earning potential and decades of forthcoming financial independence, which can be very profitable for banking institutions. To qualify, all a student must do is demonstrate the independent income or assets needed to pay at least their minimum monthly bill (usually around $10 for student cards). But if that’s not possible, it’s worth looking into having a parent co-sign, given the importance of credit building at this stage in your life.

As long as you pay your bill on time and avoid maxing out your credit line after opening one of the following cards, you will begin building the credit needed to rent an apartment, buy a car, take out a good loan and save on insurance premiums once you graduate. It may even help you get a job if you plan on working in a field that requires a security clearance or the handling of money. So make sure to browse the available student credit cards for no credit, including both secured and unsecured offers, and submit an application for the card that will allow you to build credit at the lowest possible cost.

If you’d like a recommendation, WalletHub’s editors compared all of the student credit cards in our database of 1,000+ credit card offers. We looked at their fees, rates and rewards. And we picked the best options for different types of students. You can find an overview below and more info at the bottom of the page.

Ask the Experts -Edmund H. Mantell, Professor at Pace University - Lubin School of Business   

How important is it for students with no credit history to get a credit card?

It is very important for a student (or any responsible adult with no credit history) to get a credit card. If a student discharges the credit card debt every month, that history will be useful later in life when the person wants to borrow a large amount of money from a lending institution (e.g. a bank) to finance a big ticket purchase (e.g. a home).

Does being a student make it easier to get a credit card with no prior credit experience?

Being a student does not make it easier for an applicant with no prior credit experience to get a credit card. Many full-time students are unemployed (or employed only part-time.) The lack of a student applicant's steady income raises a question for the issuer of the credit card as to whether the applicant can discharge the credit card debt.

What are some of the biggest credit-card mistakes that students make?

The single biggest mistake that student card holders make is manifested as financial myopia. What this means is that if an inexperienced user of a credit card (such as a student) makes a purchase, the card holder fails to recognize that he or she is merely deferring (not avoiding) payment for the purchase. This mistake is compounded if the card holder does not discharge the credit card debt in the month it is posted by the card issuer. In that case, interest accrues on the unpaid balance of the student's debt, usually at an astoundingly high annual rate. For example, 12% to 18% per year.

Is it easier for a student with no credit to get a credit card if he or she goes to an Ivy League school or gets straight A's?

It may be easier for a student with no credit to get a credit card if he or she goes to an Ivy League school or gets straight A’s. The reason has to do with the so-called "credit risk" of issuing credit cards to students. The finance jargon signifies the risk that a student card holder will default on the loan. That is to say, the student will fail to pay the interest as well as the principal of the loan. In that case, the issuer of the card, usually a financial institution, is left holding the bag. If a student applicant for a credit card attends in Ivy League school or gets straight As, those facts are considered evidence of the student's responsible behavior and his/her propensity for self-discipline in academic life. That kind of evidence may influence the potential card issuer in favor of issuing a card to a person with no credit history.

To what extent does having no credit hold back a recent college graduate?

If a recent college graduate has no credit history, that fact may work against the graduate when he/she applies for a loan to finance a business venture or to finance the purchase of a home. Any lender wants the money lent to be secure. If a potential lender is shown a satisfactory credit history of a potential borrower, that fact will encourage the lender to feel more comfortable making a loan.

Read the full article.