Four U.S. senators wrote a letter to Federal Reserve Chairman Ben Bernanke on Tuesday, asking him to make business credit cards protected under the CARD Act of 2009.
Senators Charles Schumer (D, NY), Jack Reed (D, RI), Bill Nelson (D, FL), and Robert Menendez (D, NJ) called on the Federal Reserve to require card issuers to be more transparent about the differences between business and consumer credit cards, the Wall Street Journal wrote. The senators feel that the same protections should be offered to users of both types of cards.
What is this CARD Act all about? Generally speaking, the CARD Act makes companies unable to suddenly increase rates and puts restrictions on fees and other aspects of credit card agreements. But these restrictions only apply to consumer credit cards, and not the ones issued to businesses.
Statistics from Pew Charitable Trusts also found that 10 million business credit cards are offered to consumers each month.Nick Bourke, director of Pew’s Safe Credit Cards Project, told the Wall Street Journal that Congress should definitely extend the points listed in the CARD Act so that they apply to business cards.
But how does one come to hold a business credit card? A study released by Credit-Land.com found thatevery major credit card issuer that offers a “business credit card” holds small business owners personally liable for debt.
What does this mean for your average Palo Verde Valley small business owner? Simply stated, individuals are currently held liable for the debt associated with their business credit cards.
Data shows that six of 10 card issuers reported that their own personal credit reports appeared on their credit history.
This is why the senators are upset. On June 14th, the four men wrote a letter to the Fed’s Chairman, Ben Bernanke.
“…We are very concerned issuers are marketing these products to ordinary consumers who may not realize they do not offer the same protections as personal cards…,” the letter said.
Pew was recently able to look at credit card disclosures and told the Journal that not enough customers know the differences between business credit cards and consumer credit cards. They said that it’s very important for consumers to receive warnings on credit cards that aren’t protected by the CARD Act.
What can you do if you have a business credit card and want to make sure the finances of your business don’t poorly reflect on your personal credit history?
Fox Business Onlines uggests keeping up with payments monthly and contacting creditors to set up payment plans if you know you’re going to need a few more days. Also, maintaining a healthy debt-to-credit ratio is important. For example, try to keep credit card debts below 50% of the limit. For example, if you have a $10,000 monthly limit on your credit card, aim to spend under $5,000 to keep your score up.