The catch for small business owners? The Act only applies to consumer credit cards. If you have a small business credit card now or get one in the future, you’ll still be working under the old set of rules.

This may not be all bad. Before I tell you why, let me share a few of the new laws that apply to consumer credit cards:

• Credit card issuers must give 45 days notice before raising rates in most cases. In addition, cardholders can “opt out” of an increase and pay off the balance at the old rate (but can’t use the card any longer).
• Credit card issuers must send out bills at least 21 days before their due date.
• Credit card rates can’t be increased on previous balances, unless a customer is at least 60 days late with payment. (And issuers must re-instate the old rate if the customer makes up the late payments and pays on time for 6 months straight.)
• Customer payments must be applied to higher-interest balances first. (Issuers can no longer offer a 0% balance transfer and then apply payments to the balance that sits at 0% before the higher interest purchases.)
• Payment due dates must be the same each month, and if the due date falls on a non-business day, the due date moves to the next day when someone is actually there to accept payments.
• Issuers can’t charge extra for payment by certain methods. For example, no extra charges for paying by phone versus paying over the Internet.
• Issuers can not allow customers to go over their credit limits (and charge over-the-limit fees) unless the customer has “opted in” for this as a service.

There are more, but this gives you an idea of how wide-ranging the new law is.

However, Congress and the president simply did not include business credit cards in the law. It may be that the majority of complaints were coming from consumers, or perhaps Congress felt including business credit cards would somehow confuse the issue. Whatever the reason, your business credit cards are likely to continue playing by the old rules.

While on the surface this sounds bad, that you are getting the shaft, there may be a silver lining here. As the economy crumbled, small businesses were the most likely to have their credit limits slashed, or have their lines closed altogether. You were seen as too risky given the market conditions. Now, though little has changed with the economy, the new credit card law has card issuers scrambling to make up for lost profits. Where better to seek profitability than the customer segment that still falls under the old credit card rules–small businesses?

So, while you may be angry that Congress didn’t address your needs when creating the new law, you may be happily surprised to find your application for new business credit greeted by a much friendlier credit card industry in the future.

The post New Credit Card Laws Don’t Apply to Small Business Cards appeared first on Small Business Trends.

Thankfully, there is a dim light at the end of the long tunnel, as the following trends and predictions about the 2010 business credit card market will illustrate:

1. Lending Via Small Business Credit Cards Will Increase

Mercator Advisory Group recently reported that 2009 would be a rare down year for purchase volumes on business credit cards. That trend should reverse in 2010. We’ve already seen at least one important step in this direction — Chase unexpectedly launched not one, but 4 different business credit cards under the “Ink” brand in 2009. With Chase performing relatively well in comparison to its troubled peers, the company saw an opportunity in a segment being underserved due to general financial industry fear. While I don’t expect to see many more launches like “Ink”, I do believe the vaults will open a bit more in 2010, especially as other big banks find their footing again.

2. Business Owners Seeking New Credit Will Need Better Personal Credit Histories

The most common question I get asked about business credit cards is “How do I get a card for my business that doesn’t impact my personal credit?” The answer in 99% of the cases is “You can’t.” Unless you have a strong business history and a substantial revenue base, your business will not qualify for a corporate card program. Instead, in seeking a small business credit card, you are asking a bank to approve you based on your personal credit history. And, in today’s market, the bar has been raised. Your personal credit history needs to look better than ever to qualify for a small business credit card.

(A side note: Because your personal credit history is the basis for approval of your business credit card, there is little difference between most small business credit cards and the personal credit cards you already have.  It is convenient to have a business card to separate business purchases from personal purchases, and it is nice to get credit card rewards relevant to common business needs. But if getting a business credit card proves difficult, you always have the option to simply designate one of your personal cards as your “business credit card” and use it accordingly. The card companies will frown on this advice, but it is true.)

3. Higher Interest Rates

While interest rates on small business credit cards are lower than consumer cards on average, they are following the same rate trend — up.

4. More Cards Issued Via “Bank-Based Relationships”

While it’s still possible to go to a big bank’s Web site and be approved for a new business credit card, there is a definite trend toward banks giving more love to those who already have a banking relationship with them. So, if you are looking for a business credit card, start with the bank where you do your checking. If that bank doesn’t offer credit cards, consider switching to a bank that does. By giving a card-issuing bank some of your money to hold, you increase the chances that they’ll (temporarily) give you some of theirs.

5. Don’t Hold Your Breath for Help from the Government

There’s been recent chatter about leftover TARP funds being used to encourage small business lending. What is rarely mentioned is the fact that the original TARP funds were not just bailout money but also cash infusions meant to encourage more lending. Instead, many banks used the money to shore up their finances, or even to buy other struggling banks. It’s hard to understand why the government believes new funds would be used differently.

6. More Business Charge Cards with Innovative Financing Models

For card companies leery of small business owners who revolve balances indefinitely and then suddenly default, the obvious product to push is the charge card, which must be paid off completely at the end of each billing cycle. But how can issuers make charge cards more attractive to business owners who want credit specifically for the ability to carry balances over longer timeframes? By offering charge cards that extend the billing cycle from a miniscule 20 to 25 days out to 60 days, or even 90 days for good credit customers with high charge volumes. The closest example currently on the market is the American Express Plum Card, which allows cardholders to carry new balances for two months interest-free if they make an initial payment of 10% of the balance.

7. A Rising Tide Lifts All Ships

Despite much hand-wringing over the sorry state of business lending by the major banks, remember that the rotten economy has also made many business owners leery of taking on more debt. With signs of at least a tentative recovery, both business owners and card issuers are putting their toes back in the water. Barring a major catastrophe, we seem to be in the beginning stages of a new virtuous cycle, in which better business conditions lead to looser credit, which leads to better business conditions, which leads to… (The cynic with an eye on history will say this eventually leads to greed, wild risk taking, and economic collapse, but let’s try to look on the bright side for now, yes?)

While I don’t expect the economy to return to full health in 2010, I believe the signs of a recovery will grease the wheels in the credit market, good news for bootstrappers and experienced business owners alike.

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About the Author: Adam Jusko is founder of credit card comparison site Index Credit Cards, which is regularly referenced in publications including the Wall Street Journal, USA Today, BusinessWeek, Money Magazine, Newsweek, U.S. News & World Report, the Chicago Tribune, and more. Of particular interest to Small Business Trends readers is the section of Index Credit Cards devoted to business credit cards.

The post Trends in Business Credit Cards for 2010 appeared first on Small Business Trends.

Let’s look at some key needs/features that a small business owner might desire when seeking credit, and see whether credit cards or charge cards are best able to meet those needs. There is almost always a trade-off, so think hard about your business requirements to determine which is right for you. (Note: Because American Express is by far the main issuer of charge cards, my commentary on those cards is based mainly on their practices.)

• Flexibility to Float Purchases – Small business owners often rely on credit cards to start a business, or to float purchases while waiting for receivables to make their (too slow) journey into the owner’s bank account. Credit cards allow you to pay as much as you want each month, or to pay very little if the funds aren’t available. Charge cards, on the other hand, force you to pay off your entire balance each month. Winner: credit cards.

• Forced Fiscal Restraint – With credit cards’ flexibility comes the possibility of racking up debt and paying high interest charges for the privilege. If you have a strong aversion to debt and may be tempted if allowed to revolve balances, the winner is: charge cards.

• Higher Credit Limits — Charge cards generally allow you to put more expenses on the card, either via higher credit limits or by waiving credit limits altogether. Why? Because you have to pay the balance off each month, so you are less of a risk. Credit cards, on the other hand, offer lower limits, because there is more of a chance that you’ll build up a balance that you will later have trouble paying. Winner: charge cards.

• Rewards – Charge card reward programs are usually much more generous than those of credit cards, from double points to more desirable reward partners to free companion airline tickets and hotel upgrades, to free memberships in “elite” travel programs from airlines, hotels and rental car companies. Credit card reward programs are usually less generous, and the trend is continuing in that direction. Winner: charge cards.

• Annual Fees — Charge cards almost always have an annual fee, while credit cards rarely do (though there are exceptions). If you want to avoid annual fees, choose: credit cards.

• Insurance Coverage – Charge cards are more likely to offer free insurance coverages that will replace items you’ve purchased via the card, as well as certain travel protections. Credit cards usually have fewer insurance protections, if any.  Winner: charge cards.

• Expense Tracking — Charge cards are more likely to furnish the small business owner with detailed expense records, allowing for easier tracking of past charges, as well as annual records that allow for tracking by spending category. This feature is useful to any business owner that has ever looked at a credit card statement and said “Who is Pers Tlv Srvcs that I paid $79.95 to?” Credit cards are more likely to provide this service today than in the past, but the winner here is still: charge cards.

• Prestige? — While a charge card won’t make you a better person, some people do get a certain satisfaction out of flashing an American Express charge card, as it may suggest a certain credit level, business authenticity, or other nebulous grandiosity that potentially could impress someone. Credit cards, not so much. Winner: charge cards.

As you can see, both credit cards and charge cards have features to recommend them. However, as with everything in life, the perks come with a price – only you can properly assess the importance of each card feature to the success of your business. But if you now have a better understanding of the differences between the two, you’re one step closer to deciding.

Editor’s note:  this article was originally published at the OPEN Forum.

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About the Author: Adam Jusko is founder of credit card comparison site Index Credit Cards, which is regularly referenced in publications including the Wall Street Journal, USA Today, BusinessWeek, Money Magazine, Newsweek, U.S. News & World Report, the Chicago Tribune, and more. Of particular interest to Small Business Trends readers is the section of Index Credit Cards devoted to business credit cards.

The post How to Choose Between a Credit Card and a Charge Card appeared first on Small Business Trends.