In 2009, Congress passed the CARD Act (officially known as the Credit Card Accountability Responsibility and Disclosure Act of 2009) to protect consumers against excessive interest rates, fees and miscellaneous charges. The act prohibits credit card issuers from initiating fee traps, excessive interest rate hikes on existing balances that create consumer default or retroactive late fees. It also mandates that issuers provides a written account of all rates, fees and charges in plain, simple language that is visible to consumers, as well as guards against excessive marketing of credit cards to young people and students.
Business Credit Cards: Not Protected by CARD Act
Only consumer credit cards are granted protection under the CARD Act. Included among these are bank credit cards, retail store credit cards, and debit and gift cards. Small-business card holders are out of luck. Why? The reason is because business owners are considered more financially savvy than regular consumers, and thus in the government’s opinion they don’t need the protection afforded by the CARD Act. Other reasons for why they are not covered include that they are taking a risk when they start a business, as well as that credit limits are higher on business cards.
Card Issuers Continue to Charge Excessive Fees to Business Owners
Business credit cards are a goldmine for credit card issuers. Because the passage of the CARD Act does not affect these cards, issuers can charge you, as a business credit card holder, excessive over-the-limit fees, can adjust your interest rate at any time, and do not have to apply your payment to the highest balance on your cards. Experts suggest that to avoid these high interest charges and fees you search for issuers that may enforce the CARD Act provisions on small-business credit cards.
Business Owners Use Consumer Credit Cards to Pay Business Expenses
In an effort to get the enhanced protection afforded to consumer credit cards by the CARD Act, many small-business owners are using their regular credit cards to purchase goods and services for their business. What you may not realize is that if you use a regular consumer credit card for business expenses, you cannot claim your interest payments as a business expense on your tax return. You can only write off interest payments on your taxes if you use business credit cards.
Be Aware of the Card Offers You Get
Since the passage of the CARD Act, many credit card issuers have aggressively marketed small-business credit card offers to prospects who are not business owners. It is important to note that you don’t have to own a business to be able to get a business credit card. Issuers know this and they use this knowledge to enhance their business profits. In 2010, business credit card offers increased by more than 200 percent.
Many experts advise consumers not to acquire a business credit card if they do not own a business. This is because if they do get one, they will not receive the protection of the CARD Act granted to consumer credit card holders.