Many small businesses use credit cards to pay their bills. Not only does a professional card (also called a small business credit card or corporate credit card) provide them with a line of credit, but it can be a useful tool for tracking business expenses and accounting for tax payments. Professional cards are sometimes offered to consumers, and, reportedly, such offers may be on the rise.
Before you accept an offer for a new credit card, be sure that you know whether it is a professional credit card or a consumer credit card because the rules that apply to each may be quite different. In particular, professional card holders are not protected by the Credit Card Accountability, Responsibility and Disclosure Act of 2009. This law enacted a number of consumer protections related to, among other things, interest rate increases, payment cycles and fees.
Here are some things to watch for if you are considering an offer for a professional credit card:
1. Check the card’s rules for rate increases. Under the 2009 credit card bill, interest rates on consumer cards can’t be raised unless a payment is at least 60 days late. However, don’t assume that your professional card has the same restriction.
2. When a consumer makes a credit card payment greater than the minimum, the amount in excess of the minimum has to be applied to the highest-rated balance first. This is not necessarily so with a professional card.
3. Late fees on consumer cards usually can’t exceed $25 or the amount of the minimum payment, whichever is lower. Again, this may not apply to a professional card.
4. Holders of consumer cards must opt-in if they want to be able to exceed their card’s credit limit, which will trigger additional fees. This may or may not be true of a professional card.
While you should read the fine print in any credit card agreement carefully, this is especially important for small business cards. Some credit card companies may voluntarily apply the restrictions included in the 2009 credit card law to professional cards, but many don’t. Therefore, be sure that you read and understand the terms of a professional card before you accept it and, if you receive notifications of changes to the terms, read those carefully as well.
Also, be aware that activity on a professional card will be reported to credit agencies and will apply to your personal credit report just as if it was a consumer card.
Jessica Silver-Greenberg, online.wsj.com, Beware That New Credit-Card Offer – WSJ.com
Aleksandra Todorova, www.smsmallbiz.com, smSmallBiz.com/Five Things To Know About Small Business Plastic