The Proliferation of Credit Card Stacking Services: Opportunity or Pitfall for Business Funding?

The allure of easy access to capital is a siren song for many business owners, particularly in the crucial startup phase. This is where the concept of credit card stacking enters the picture. It has been around for many years but is the zero percent interest business funding a legitimate financial strategy or a dangerous trap disguised as a shortcut?

I started exploring the topic after clicking on a few videos on social media that led me to more and more and more. They are everywhere. So because business owners often turn to business credit cards for funding, more statistics on that later, I thought I would delve into the world of credit card stacking, exploring its pros, cons, and the recent surge in its promotion.

What is Credit Card Stacking?

Credit card stacking refers to applying for multiple business credit cards from major banks in a short period to accumulate a larger pool of credit at 0% interest as a promotional rate. The goal is to unlock a significant amount of unsecured credit at o% that can be used to finance business operations, growth initiatives, or to build business credit.

Proponents of credit card stacking often highlight the perceived ease of obtaining approvals compared to traditional small business loans, which can involve lengthy applications and stricter qualification requirements. The claim is all you need is a FICO score above 680 (some say 700), a business entity, and an idea, not even an existing business with any revenue! How simple right?!

The keys to this process from the service providers are knowing who to apply to, when to apply to them, having existing relationships with the credit card issuing banks, and some say they can help you buy an aged entity so that you can get approved for more. The service provider gets their service fee from the business owner as a percentage of the amount approved.

However, to liquidate the credit into cash there is an additional fee.

The Double-Edged Sword: Pros and Cons

There are two sides to the credit card stacking coin. Here's a breakdown of the potential benefits and drawbacks:

Pros:

Faster Access to Funds: Credit cards often have quicker application processes and approval times than traditional loans. This can be crucial for businesses needing immediate funds.

Potential Rewards: Some business credit cards offer attractive rewards programs, such as cash back on purchases or travel points. These rewards can be used to offset operational costs or provide travel benefits for business trips.

Building Business Credit: Responsible management of credit card debt can help establish a positive business credit history, which can be beneficial in securing future financing. Be sure the card does report to the business credit bureaus and not to personal, as some do.

Cons:

High-Interest Rates: Business credit cards will likely have higher interest rates after any promotional rate than traditional loans from banks and even some alternative funding options. This can lead to a snowball effect of debt if not managed carefully.

Debt Burden: Stacking multiple credit cards creates a significant debt burden, requiring consistent and high minimum payments. This can strain cash flow and limit your ability to invest in other areas of the business.

Credit Score Impact: Applying for multiple cards in a short timeframe can trigger numerous hard inquiries on your credit report, potentially lowering your credit score.

The Rise of Credit Card Stacking Brokers and Affiliates

The perceived ease of credit card stacking has fueled the growth of brokers and affiliates who market these strategies to business owners. If you click on any post or ad pitching business credit card stacking on the most popular social media platforms you will be inundated by people pitching the service. These entities often paint a rosy picture, downplaying the risks and mainly emphasizing the potential rewards. This aggressive marketing can be misleading, particularly for new business owners unfamiliar with the financial implications.

Most never talk about repayment of any funds used, as if it's a given the business owner will get a 100K in new credit, spend it, and have no problem paying it back within the timeframe of zero percent interest.

Statistics: Business Credit Card Usage

• According to the 2024 BOSS Report by Bluevine, 55% of those business owners seeking access to capital in 2024, a new credit card tops the list. 

• A Borrowing Dynamics report by PYMNTS Intelligence from January 2024 which surveyed 2,668 SMBs derived that 51% of SMBs use rewards credit cards as a financing tool for their business.

These statistics highlight the prevalence of credit cards as a funding source for small businesses. It gives business loan brokers and other funding companies insight into how SMBs use financing, what the business owners value in obtaining funding, and how a broker or funder can use this information in their sales process to convert more clients.

However, it's important to distinguish between responsible credit card usage and the risky practice of stacking. Entrepreneurs must approach credit card stacking with caution and a well-defined repayment strategy. 

Credit card stacking can be a valuable tool for business owners who need quick, unsecured financing and can manage multiple credit accounts effectively. For those who find the process daunting, working with a reputable credit card stacking company can provide guidance and help mitigate risks.