The Credit Card Accountability Responsibility and Disclosure Act of 2009 was meant to protect consumers from unexpectedly higher rates and unwarranted penalty fees. The law does not, however, cover business credit cards.
For example, the National Federation of Independent Business (NFIB) puts its name on the NFIB Business Edition MasterCard, issued by First Bankcard, which allows it to add terms and conditions that it could not use in a consumer cardholder agreement. According to Businessweek, First National can raise cardholders’ interest rates whenever and by however much it wants, with a 30 percent penalty APR for customers who miss payments. The card also charges a 3 percent foreign transaction fee and a balance-transfer fee of 4 percent, higher than the average consumer card, according to industry site CardHub.com. The business-card issuer also may require a business owner to sign a personal guarantee and become liable for the debt in case of non-payment if the business fails, according to John Ulzheimer, credit expert at CreditSesame.com. This means that a default or negative performance on the card could damage the business owner’s personal credit reports.
Credit experts say there still may be benefits for an entrepreneur to use a business credit card instead of an ordinary card; the account might not appear on a user’s credit report and may have higher credit limits. “We typically recommend that business owners use a rewards business credit card for everyday expenses they pay in full each month, in order to earn lucrative rewards in key business expense categories, as well as a 0 percent consumer credit card for financing purposes, in order to garner user protections without sacrificing selection,” says CardHub CEO Odysseas Papadimitriou.