Paid Off a Business Credit Card
Well, I am very excited as I bet you can guess from the title because I managed to send in the last payment on my Capital One Business Credit Card this past weekend. I may have a few dollars left on the next bill from a little bit of residual interest, but I am pleased to say that I was able to knock one out. You may recall that I run my business activities through a limited liability corporation. This LLC handles all of my real estate transactions as well as the income that I get from blogging.
In a previous post, I mentioned that I was sending in an extra payment as a result of a check that I received as part of the Google AdSense program. This check coupled with a little bit of other blogging income and some over payments that I sent on my own have combined to pay off the card on which I had carried a $3000 balance since spring when I used it to replace the flooring in one of my rental properties.
I am really pleased that it is paid off now since the interest rate was not exactly the best. I paid $430 in interest charges last year and only a little bit less this year. So I will be enhancing my monthly cash flow by the $75 minimum monthly payment (although I was paying much more) and the $35 in monthly interest charges. That is an extra $110 per month which represents about half of the profit that can be gained by owning one of my rental properties. It would take over $25,000 in capital earning 5% interest after taxes to generate that type of passive income. And yet, I was able to do it simply by paying off that credit card.
Business Credit Line is Next Target!
My next target is a business credit line which I have also used for repairs in the past and to smooth out cash flow issues with the real estate. Obviously, that hasn’t been the best idea, but the past is over. I can only look to the future and make it better, learning from my mistakes and not repeating them.
With that in mind, I will be paying off this credit line. The total credit line is $2500 but I have not been adding to it. In fact, I was able to take what I would have paid toward the credit card and apply it to the credit line. The current balance is right at $1000 although it was higher at the beginning of 2011.
For 2010, I ended up paying $360 in interest charges which equals $30 per month. Add that to the approximately $100 monthly minimum payment and my cash flow will improve by another $130 per month within short order.
Then, I will plan on setting aside some funds for future repairs. This will be my business emergency fund. It will be a good feeling to have that money available so I don’t have to rely on credit for emergency purposes. Again, I plan on rectifying past mistakes and making improvement in my overall financial situation.
In the near future, I will be considering my overall goals for 2012 some of which will include financial goals for my LLC. As I sit down and reflect on this past year, I am encouraged by the progress I have made and will be looking forward to even more in the year ahead. Having a sense of what is possible will make it easier to sit down and work out those goals.
I am so pleased and can’t stop smiling today!
Sounds like you’re definitely on the right path with cutting down on your debt. Was the interest a tax-deductible business expense? Also, I may get some advice from you in the near future in regards to how to most efficiently (re: cheaply) set up an LLC as we are looking to start running our blogging operations through one.
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MUM – We used Legal Zoom for a multi-partner LLC and are happy with the cost and what we got. Not difficult to do.
Paul @ The Frugal Toad recently posted..Ready to go Travel? – Try a Vacation Rental for Big Savings
Legal Zoom would not be a bad option either. Obviously, if more you start to involve more members in the LLC, that is when problems can develop. If everyone is happy, there is no need for contracts.
I assume it was deductible. I send the information to my accountant and have him deal with it. That is one good expense that I cherish. The amount of time I save by letting him do my taxes is enormous. As for the LLC, I was able to download some free forms off the internet such as the operating agreement and modify slightly to my needs. The only members are my wife and I. It cost $90 to register with the state of Indiana and $22 every 2 years to fill out the ongoing business paperwork online. I had to call the IRS for a tax number which was really simple. It took about 10 minutes.
Congratulations. Paying off debt feels so goooooooooooood doesn’t it? You should kick your business card across the room and yell “This is Sparta!”
YFS recently posted..Work Hard and Shut Up!
Right now I can’t kick anything as I am quite ill and feel anything be sooooo good, but the nausea is leaving and I am keeping down sips of Sierra Mist and a couple crackers. Got hit hard last night.
Congratulations. Success can be any accomplishment and it feels great!
krantcents recently posted..$12K Will Make You Rich
Yes, I am enjoying having it paid off. Looking forward to the next piece of the puzzle.
Congrats CFM on paying down the Cap1 card.
As we posted recently at TheMoneyPrinciple, the banks make an absolute killing on credit cards both from the card holder and the storekeeper.
One of the irritations is how you can’t set a payment between minimum and full. The only facility I know where you can is the John Lewis card in the UK where you can set a percentage, an actual amount and a maximum payment subject to the usual banking minimums.
It is only a slightly more complex one-liner in the coding but none of them do it – they like to trap you into the minimum payment hoping you will forget to overpay which of course many do, particulaly at Xmas!
John@MoneyPrinciple recently posted..Why banks love to lend
Yes, I am sure that they do make a killing. Makes me think about investing in Visa or Mastercard stock.
Paying off debts is always cause for celebration!
101 Centavos recently posted..How To Buy Junk Silver Coins On eBay
So true.
Awesome effort! How cool is it paying off debt with your hobby? Tidy sum too, keep up the great work on the personal finances and the blogging income too.
P.S. hope you are feeling better soon
Shaun @ Money Cactus recently posted..Finding Ways To Earn More Money
It is a great thing to be able to make some extra money to pay off debt with a hobby.
PS–I think I am about 80% now. Able to keep down Sprite and crackers. Planning on a little soup for lunch.
I like how you’ve added up the interest you’ve paid to this accout over the year. That’s something I’ve never done before and I think it’s a good way to look at debt.
Looking at things in terms on interest rate is a good measurement but actual interest payments is kind of like a slap in the face especially added up over the course of a year. I don’t want to see mine.
Brian recently posted..How I’m “Saving” For Retirement
That is just for one card. Needless to say, if I added it up for everything, I would be a bloody mess.
Congrats; that’s such great news! How bout that for ROI!
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Yes, it is a great investment! Thanks.
Congratulations. I bet that is a huge weight off your shoulders.
Miss T @ Prairie EcoThrifter recently posted..Put Yourself on the Path of Happiness for the Holiday Season
It is actually one small weight out of many, but feels good nonetheless.