Should Small Business Credit Cards Enjoy Fair Card Practices like Consumers Do?
You've heard of all the great new consumer protection rules the government is putting into place to help credit card holders stay safe from unfair business practices haven't you? Depending on how you look at it, it could be good news or bad news; but the government, for your own good, wants to deny holders of small business credit cards all of those protections. That means that the bank will be able to raise interest rates without notice, change penalties and fees at a whim, and change terms whenever they feel like it.
The government wants to go this way for two reasons - they see that credit is already really tight for small businesses; they don't want to do anything to annoy the credit card companies into withdrawing from holders of small business credit cards what little access they have to easy credit. And second, they feel that businessmen aren't like ordinary consumers. They understand money; and financial responsibility is their main skill. They won't need to be protected.
There are some like American Express and Capital One that feel they should apply some of those consumer protection rules to small business credit cards too even if they arent required to by law. They plan to design credit card statements for instance, to be more clear so that payment terms fairly jump out at business accountants. And they also plan to allow cardholders five weeks notice before they change fees and rates.
Not that they need to make a big deal of it; these are fairly trivial allowances. Lets look at what protections small-business credit card holders are denied now (protections that consumer card holders get ). To begin with, the credit card companies will recognize no upper limits to penalties and fees that they may apply to anything the cardholder does. And if there is a late payment involved, they will immediately and without notice charge higher rates and bring on harsher conditions.
Just as the government fears, the credit card companies claim that should new consumer protections enshrined in the credit card act be made to apply to them, that they would be forced to slash credit lines to business owners. Businesses dont run on steady incomes; their profits are seasonal; credit card companies feel that they need to price their business products for the increased risk involved in administering small business credit cards.
There is no real urgency anywhere in the government to help extend consumer protections to business users either. If as a small businessman you are tempted to co-opt your personal card for business use, youll need to drop the idea. Itll be more difficult to maintain accounts for tax purposes, and you'll miss out on business card benefits and supplier discounts. Youll just have to be more careful with your accounting practices is all.