From the desk of San Francisco lead attorney Alison Cordova.
In October of 2010, the landmark CARD Act became law which increased transparency and strengthened consumer rights in the credit card industry. Unfortunately, the law did not apply to small business credit cards. Representative Nita Lower, D-N.Y., introduced the Small Business Credit Card Act of 2013 to Congress in an effort to remedy this oversight, but GovTrack only predicts a 1% chance of enactment.
ABC news recently highlighted a study by CardHub, which analyzed the small business credit card policies employed by the nation’s 10 largest card issuers. Here were the five major takeaways according to ABC news:
1. Issuers can increase small business interest rates at will.
2. Small business credit cards are personal in nature, i.e. “If you submit a business credit card application for your company, the issuing bank will review your personal credit rating. Then, if you’re approved, account management will be reflected on your personal credit reports and you’ll be personally liable for account balances.”
3. You might not get much advance warning of account changes.
4. Payment allocation might not be favorable.
5. Small business cards also offer business-oriented perks, like rewards for telecommunication services and office supplies.
If you are a sole proprietor, it may be better to utilize personal credit cards, rather than a small business credit card. A variable interest rate is not ideal, and both types of cards affect your credit the same.
Either way, if you are a business owner with escalating personal or business credit card debt, it is in your best interest to get rid of that debt so as to avoid high interest rates and late fees. A debt settlement attorney can help streamline your credit card debt into one payment and negotiate for substantial reductions in that debt so that your business can get off the credit card treadmill.