Business Finance Solutions

Jonas Renfold asked:

Before you sign up for a business credit card, you need to understand the risks of getting one, because they may not offer the same protection to consumers as personal credit accounts, and you may find that your getting more than you bargained for. It’s a smart idea to consider carefully whether your business truly needs a corporate credit account, and if it does, whether or not the risks of going without consumer protection outweigh the benefits of having a business credit card available to you.

What exactly is consumer protection? Consumer protection refers to the protection that customers get by law. In 2009, legislation was passed that was known as the Credit Card Accountability, Responsibility and Disclosure Act, or CARD. This law is in place to protect customers from rate increases on existing payments or to protect them from rate hikes when they miss a single payment. Also, consumer protection provides guidelines that keep consumers from having their payments applied to the balance with the lowest rate, before the higher ones, in order for the card companies to make more money.

However, business credit accounts do not fall under the protection of the CARD Act, which makes them risky for business customers, especially with the thousands or tens of thousands that many small businesses spend each month with their commercial accounts. Business lines of credit should only be used by businesses that need them, and by those that understand how they work completely. They should never be used by regular consumers, with or without a side business, but some companies attempt to market these cards to regular consumers in order to avoid the CARD Act.

In fact, New York Senator Charles Shumer recently was at odds with marketing departments of some issuers for this very act, saying that the cards were being marketed to those that didn’t even own a business or were retired. This allows companies to avoid following the new legislation and charge consumers more money. Schumer is working with the Federal Reserve Board to make sure that credit card companies list clearly on business applications that the cards are not meant for personal use. Business credit card offers through the mail are up more than 250% from the previous year’s quarter however.

Current consumer protection on personal accounts include CARD and other legislation aimed at protecting consumers from unfair practices by unscrupulous companies. This type of protection dates all the way back to as early as 1968, with the Consumer Credit Protection Act. However, many business credit cards are exempt from these regulations and you must examine your card’s contract carefully to determine what protection, if any, if offered by your commercial credit card and make sure that you are very responsible when using your business credit card. Never put personal credit on your business credit line so that you have a clear record for tax time.
merchant card advance Oklahoma
merchant credit card Oklahoma
merchant card services Oklahoma
business cash advance Oklahoma
SBA

Leave a Reply