Q: Does the Credit CARD Act apply to business credit cards?
The Credit Card Accountability, Responsibility and Disclosure Act, commonly known as the CARD Act, only applies to credit cards issued to consumers and does not impose new laws concerning business credit cards.
The whole point of credit card reform was to level the playing field for consumers and make sure they weren't subjected to unfair practices by banks and other credit card issuers. As a result, some of the changes ushered in by the CARD Act were:
- A ban on retroactive interest rate increases (unless you pay your credit card 60 days late)
- A requirement that banks give customers 45-days notice before a rate hike
- A mandate that payments be first applied to the highest rate balances
- Rules for how quickly banks must apply payments
Again, all of these provisions (and more) impact only consumer credit cards. That's the case even though business credit cards function much like consumer cards and are personally guaranteed by business owners. In fact, about 80 percent of small business owners in the United States use credit cards to finance their operations, according to the National Small Business Association, which is pushing to get business cards covered under the CARD Act or similar reform legislation.
There is a bright spot for business credit cards, though, in the wake of the CARD Act.
A couple of credit card issuers have voluntarily extended many of the CARD Act's protections to customers who have business credit cards. For example, Capital One and Bank of America have both opted to proactively offer to their small business credit cardholders many of the same protections that the CARD Act offers to people who have consumer credit cards.
Just realize, however, that without a legal requirement to provide certain protections to business cardholders, credit card issuers can change those protections anytime at their sole discretion.
- Can you recommend a good business credit card for a business that is just starting out?
- Which business credit card has more appeal to creditors when applying for other business credit tradelines?
- Do any credit card companies penalize you if you have zero balance on your card and haven't used it for a few months?
- I have an excellent record for payments on all my cards, but I'm paying as high as 29 percent interest. How can I lower the rate?