Finding the Loophole in New Credit Card Laws
Credit card companies will use professional cards as a way to increase their profit margins.
Credit card companies are looking for a way to recoup some of the losses they’ve experienced following the implementation of the new credit card law this March and they’ve been using professional cards as a way to increase their profit margins.
This puts small business owners in a difficult position. Traditional credit lines have been frozen for some time, leaving business owners scrambling for capital to fund their ventures. Credit cards seem like an attractive option to turn to, but there are risks.
Many small business owners don’t realize that the new credit card laws which went into affect earlier this year only deal with personal credit cards, not professional credit cards. This can be a major problem for small businesses that don’t understand how the loophole in the law affects them.
For example, The Ink From Chase card, one of several professional cards offered by the bank, is one professional card subject to the whim of issuers. The card agreement says Chase is free to implement a default rate of 29.99% if a customer is late by just one day on a payment.
Holders of Capital One’s Business Platinum Card, meanwhile, can see their low introductory interest rates spike if they are just three days late with payment twice in a 12-month period, far less than the 60-day notice for personal cards required under the Card Act.
These are just two examples of the practices card issuers can still use when dealing with professional cards, but there are many more out there. There are five major differences between personal and professional cards.
Under the new law credit card companies can apply any payments in excess of the minimum to balances with low interest rates, don’t have to allow 21 days after a statement is mailed before payment is due, can raise rates on existing balances if late payments are made to a different creditor, can charge big fees if cardholders exceed their limit and, maybe most importantly, card issuers can change agreements without giving advanced notice. All of these practices are now illegal in regard to personal cards.
What do you think of the credit card industry’s strategy in regard to professional credit cards? Is it good business or bad faith in this struggling economy?
Business Coaching | Stephanie Sims | September 2, 2010
Business Coaching, credit card laws, new credit card laws, small business, small business coaching
This is most definitely bad faith in this economy. Many people are in bad personal situations due to credit card overextending credit limits that they NEVER should have. Now, they want to carry this same philosophy to business; ie. if you keep pulling the rope around someones neck eventually you will strangle them! I have lost a lot of my faith in Banking industry as I have seen too many people hurt by not being dealt with fairly. The consequences are huge and only big business benefits. Whatever happened to the concept that a good “deal” is a “Win Win” for everybody? Have we become that greedy?
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