Don't Charge It: The Hidden Risks of Business Credit Cards

Think twice about making purchases with a business credit card.

Although landmark legislation passed in 2009 bans unfair rate increases, curbs fees and extends other protections for users of ordinary cards, the law doesn't apply if a card is labeled for business, commercial or professional use. That means people who use cards issued by big corporations and small businesses alike may be at risk. Concludes the Pew Charitable Trusts in a new report:

[W]hile consumer credit cards in general no longer include unpredictable pricing structures and hair-trigger penalty interest rates, these and other potentially harmful practices remain common on business credit cards that millions of individuals use.... Pew researchers found that the same potentially harmful practices previously applied to consumer credit cards remain widespread among business cards.

• Change terms, including raising interest rates on existing balances, at any time with little or no notice
• Apply a penalty interest rate immediately and without notice for any violation of the account terms
• Charge penalty fees with virtually no restrictions
• Direct payments first to low-rate balances, allowing interest to accrue on higher-rate balances

Though issuers deserve fair compensation for the value they provide to business cardholders, this blanket exemption from consumer protection laws is no longer warranted. Individuals and small business owners have little bargaining power and receive inadequate information about the significant legal differences between consumer and business credit cards. At the same time, they are personally exposed to risks that cards provided strictly for consumer purposes cannot legally contain.

Image from Wikimedia Commons
Related:

• How New Credit Card Rules Are Helping Consumers -- and Banks
• Charge! The CARD Act is Financial Reform That Works
• Financial Reform: How Regulating Debit Cards Helps Retailers and Consumers