Funding your business using credit cards?

I just came across an article about using credit cards to fund your startup. Although, the article is for the US environment, I think this is a patently bad idea, especially in India. The current interest rates on credit card debt are close to 2% per month, which is 36% per year! If that is not usurious, I don't know what is. It might actually be cheaper to go and raise money from your neighborhood money-lender!

The rules in India allow the directors to pay for certain expenses of the company from their own resources, and to then get reimbursed a few months or maybe a year or so down the line when the company has started generating enough funds. Knowing that fewer than 5% of new ventures actually succeed, why take such a huge risk and be saddled with debt and surmounting interest costs?

In any case, rolling over credit card debt, or switching from one provider to another just because you're exceeding your credit limits on the first card, means that you're spiraling way down a debt trap. Doing this, when trying to get your business up and running is a horribly bad idea. So don't fall for the temptation of abusing your credit ratings you might have built up by religiously paying off your credit card bills while you were in a regular salaried job. Your income when running your business is going to be close to nil for the first year or so. It is far better that you work harder at building up the funds yourself or rallying family and friends around to the idea of supporting your business.