Reform laws protecting credit card consumers enacted five years ago have had a sweeping, positive effect, virtually eliminating or reducing unjust fees and interest hikes.
There has also been a $6 decrease in the average late fee, which has saved consumers $1.5 billion as of 2013. Consumers have also enjoyed a near elimination of over-limit fees that saved consumers $2.5 billion in 2012 alone.
But many of the CARD Act’s protections don’t apply to small business owners. The most important protection that they are missing is the rule that prohibits credit card companies from raising interest rates on existing debt — unless a cardholder is at least 60 days delinquent.
CardHub’s 2015 Small Business Credit Card Study helps shed light on the friendliest credit card issuers for small-biz owners.
“The fact that issuers are allowed to reprice business credit card debt whenever they want means the 37 percent of small business owners who use credit cards for financing purposes each year are never assured of how much their debt will cost,” reports CardHUb.
Such debt uncertainty prevents small business owners from allocating capital and growing their businesses, which could in turn have dramatic repercussions for the economy.
“Credit card debt instability is a huge problem for smaller businesses—particularly younger businesses since they rely more heavily on credit cards,” Molly Day, VP of public affairs for the National Small Business Association, told CardHub. “If entrepreneurial people can’t garner the capital to launch a business we’ll see fewer start-ups, which means slower employment growth and less innovation.”
Some Card Issuers Offer Broader Protections
But CardHub has some good news. Some major credit card issuers have taken it upon themselves to proactively extend certain key CARD Act protections to their small business offerings.
Understanding which card providers have adopted which protections is beneficial to small business owners, and to consumers and investors — both of whom seek the major banks with the most flexible terms.
The card issuers with the highest scores related to CARD Act protections are Bank of America (100 percent), American Express (60 percent), Capital One (60 percent), Chase (45 percent) and Citi (45 percent).
CardHub’s report examines the extent to which the nation’s 10 largest credit card issuers have adopted CARD Act protections for business-branded cards, and how closely they tie such cards to the personal finances of account holders. Here are some results. (See the chart below for more.)
- All major credit card companies hold customers personally liable for business credit card use. Also, every major issuer uses personal credit data to determine business credit card eligibility.
- Bank of America continues to be the most small business friendly credit card company, as it is the only major bank to have yet extended all of the major CARD Act protections to its business-branded cards.
- Bank of America and Citi are the only two major issuers that do not report business card activity to customers’ personal credit reports.
- Discover, U.S. Bank, and Wells Fargo are the least small business friendly credit card companies, having extended the fewest CARD Act protections to their business-branded cards and scoring just 30% in this study.
- As was the case in 2014, 70 percent of the largest U.S. card issuers offer general-purpose business credit cards. The exceptions are Discover – which is no longer accepting business credit card applicants – USAA, which does not have a business credit card, and Barclaycard US – which only issues co-branded business cards.