Thursday, September 9, 2010

Business credit cards exempt from new consumer protection law

If you're joining the ranks of the self-employed, you'll need to take certain steps to show you're serious about your business. A designated home office is a good idea. So is a professional-looking website.
Many nascent entrepreneurs believe they also need a business credit card. But while a corporate credit card may impress the folks at the local office-supply store, it's important to understand the risks.

Business credit cards are exempt from the Credit Card Accountability, Responsibility and Disclosure (CARD) Act that was signed into law last year, says Bill Hardekopf, chief executive of

That means business card issuers can increase the interest rate on your existing balance, jack up your rate after just one late payment and apply payments to the balance with the lowest rate first.

Last week, Sen. Charles Schumer, D-N.Y., charged credit card issuers with marketing business cards to consumers in an effort to evade the new consumer card restrictions.

"Credit card companies are purposely hawking corporate cards to consumers who don't own a business and may even be retired," Schumer said in a statement. "This is more than deceptive marketing. It is a dirty trick meant to get around the new credit card law."

Schumer called on the Federal Reserve Board to require issuers to make clear on business credit card applications that the cards are not intended for personal use.

Officials with the American Bankers Association say they have seen no evidence that credit card issuers are marketing business cards to consumers. It's clear, though, that issuers have ramped up solicitations for these cards. Card issuers mailed out 46 million business credit card offers in the first quarter, up 256 percent from the first quarter of 2009, according to Synovate Mail Monitor, which tracks such offers.

Weigh benefits, costs

Small-business experts strongly recommend using separate credit cards for business and personal use. That way, you have a clear record of tax-deductible business expenses when you file a tax return.

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