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Small businesses owner with business credit cards face the brunt

2011-07-27

With bank loans being hard to come by, an increasing number of business owners are becoming increasingly dependent on their business credit cards to cover their short term and long term expenses. However, this can be pretty risky because business credit cards do not enjoy the same protections that consumer credit cards enjoy. The interest rates and other charges and fees on the business cards can be increased by the banks without giving sufficient notice to the card holders. This can lead to huge debts if there is a lack of proper financial management.

The Pew Charitable Trusts conducted a study in the month of May that looked into the direct mail solicitations and account disclosures on credit card application forms. The study included 12 major credit card lenders in the country who constitute 85 percent of the total market share for small business credit cards. The results of this study are not something to pride upon and do not reflect well on the banks.

The CARD Act was introduced by the Congress in 2009 to curb the menace of credit card companies increased rates and charges on credit cards without prior notice, thereby posing problems to consumers. The legislators of the law failed to take into consideration the business credit cards which have resulted in these cards lacking the relevant protections. The results of the study conducted by Pew reveals that over 80% of the credit card lenders do not extend the protection of the CARD Act to business credit cards. In addition to ‘anytime’ interest rate changes, these banks also charged exorbitant penalty rates for late payments.