Last May the Credit Card Accountability, Responsibility and Disclosure (CARD) Act was signed into law, containing a sweeping set of regulations designed to curb many unfair credit card issuer practices.
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.
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