What To Do: Credit Card Act Not A Help For Small Business

By Ashley Jones on April 16, 2010, 6:28 am Posted in Business News

Small Business Owners got very little from the newly enacted credit card bill on February 22, 2010. The new bill is vague when it comes to rate hikes and related protections to small business credit cards. Although, consumers benefited from new law but it seems that such rulings are not beneficial to small businesses that use their business credit cards to finance loans, extensively. The NSBA reported that nearly 63% of small businesses reported a hike in interest rates whereas 41% complained about reduced credit limits.

Effects Of New Bill

Experts argue that the new law may entice banks to act against business credits, in order to cover up for their limitations on consumer cards. Consequently, small business owners may start to compile business loans on their personal consumer credit cards. Unfortunately such a practice will allow business debit to show up on business credit cards, ultimately lowering respective FICO score of small business owners. Moreover, it will be difficult for small business owners to account for changes in business and personal spending. In fact, using consumer credit cards for business purposes can prove destructive. Nevertheless, if government does not address issues related to business cards, it may promote small business owners to turn to other means of financing.

What Can Be Done

In these trying situations, small business owners should contact their business credit card companies to keep abreast of current situation. Experts also recommend carrying another personal credit card with zero balance. Besides, some heavy purchases should not be financed using business credit cards. Most expensive purchases can easily be financed by other means.

 

Short Description

New laws concerning credit cards had little impact on holders of business credit cards. As majority of business owners continue to finance their purchases through business credit cards, protection for consumer cards may actually promote banks to raise interest rates and reduce credit limits for business cards. Industry groups and business analysts have voiced their concerns regarding vague rules pertaining business credit cards, suggesting that without any protection, small business owners may start financing their business needs through consumer credit cards. They also recommend other viable options.

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