CARD Act Protects Consumer Credit Cards – But Could Hurt Business Users

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act, which took effect in late February, is good news for consumers who use credit cards, but could be bad news for small business owners, SMSmallBiz reports.

The CARD act affects only consumer, not business, credit cards. But like consumers, in the past few years business owners have been hit by rising interest rates and fees on their business credit cards. They’ve also been struggling with rising costs for accepting credit and debit cards. Interchange fees–the fees charged by credit-card issuers to merchants whenever a credit or debit transaction takes place–increased from between 1.25 percent and 1.91 percent in 1991 to between 0.95% and 2.95 percent in 2009, according to a recent report on credit cards by the Government Accountability Office.

credit cards

Not only have business owners gained no relief from interchange fees, they’re also likely to be hit with even higher fees, rising interest rates and more confusing billing tactics. “There is a whole revenue stream that has been shut off to credit-card issuers [by the CARD Act],” Molly Brogan, spokeswoman for the National Small Business Association in Washington, DC, told SMSmallBiz. “They may look to small businesses to make up that revenue.”

If you’re considering using your personal credit cards for business reasons to gain the protections of the CARD Act, don’t. Gerri Detweiler, small business credit adviser with educational website, cautions that combining personal and business expenses on a personal card can hurt your credit score, prevent you from deducting interest and annual fees as a business expense, and even put your corporate structure at risk.

At least one source is hoping business credit card users might benefit from the CARD Act. Nessa E. Feddis, vice president and senior counsel for the American Bankers Association in Washington, DC, told SMSmallBiz that some of the benefits of the CARD Act–such as consistent billing periods and allocation of payments–might get applied to business credit card users as well. “When a computer-oriented change is required, for example,” she explains, “it may be easier and more efficient to apply the same rule [to all users].”

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Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.