You cannot read any credit related news without hearing how consumers are getting squeezed by higher credit card interest rates, credit restrictions and other negative account changes. Small business credit cards suffer from many of the same challenges. For example, Advanta and Office Max are no longer issuing business credit cards. Many small business card issuers are tightening their credit standards and/or scaling back their business credit card marketing efforts. Credit card reform is likely to help consumers, but new laws thus far have ignored credit cards for business owners.
Rosa Alfonso, Director of Public Affairs and Communications for American Express, offered input on the dilemmas facing small business owners in this market.
How has American Express changed over the last year with reference to small business credit cards and credit offers?
We've increased lines of credit for some and decreased them for others, but the average credit line for a small business credit card has remained somewhat steady over the last several years. The aggregate amount of open credit lines available on credit cards to our small business customers at the end of March totaled $28 billion.
Our aim in assigning credit limits is to strike the right balance between accommodating our card members' spending needs and, at the same time, prudently managing credit risk--for us and for our card members. In addition, while decisions are made on a case-by-case basis, the driving factor in determining a card member's credit line is his/her overall level of debt relative to his/her financial resources. Beyond that we look at many factors, including the card member's spending and repayment pattern with reported income, his/her credit bureau data/scores, etc.
Chase, Discover Card, Capital One, and Bank of America (among others) still offer credit cards to small business owners, but it's typically more difficult getting credit today. Some small businesses card issuers have stopped opening new accounts or, at a minimum, they are tightening their credit standards. How does American Express view this challenging credit environment?
We have been serving business owners for 21 years and we remain committed to meeting their spending needs to help them operate resilient businesses. As stated above, we've increased lines of credit for some and decreased them for others, but the average credit line for our small business credit cards has remained somewhat steady.
In recent years, American Express OPEN has significantly expanded the range of card products that we provide to business owners, and those products are at the core of how we meet the purchasing needs of our customers. Currently, we offer 14 credit and charge card (pay in full) products for small business owners.
Most recently, American Express OPEN reached an agreement with Advanta to extend an invite to select Advanta customers to apply for a new small business card. Advanta will be marketing the offers to these select customers. American Express would issue cards to those business owners approved to receive a new card.
How does the tightening of business credit affect small business owners?
We realize that our credit decisions will impact our business customers in different ways, and we do not take any of these decisions lightly. Like all card issuers--and business owners themselves--we are managing our business in a way that reflects the current economic environment.
It's refreshing to still see at least one card issuer who is committed to the small business credit space. The announcement earlier this week involving CIT Group's financial woes is another potential major blow to the small business credit market. Robb Mandelbaum from the NY Times has an interesting blog about the CIT development.
If you have had small business credit struggles and/or successes, we'd love to hear from you!