Small Business Cards Protected by the New Bill
Nearly 44% of small businesses admit they use credit cards as the major source of financing, more than any other type of a loan offered by the lending industry. But as their popularity grows, so do the interest rates and other terms specified in the agreement. The National Small Business Association expects a miracle to come after the Credit Cardholders' Bill of Rights Act gets its full force.
Strongly adhering to the laws of competitive market, NSBA is surprised at how card issuers violate the principles of healthy cooperation, playing their own rules that too often underestimate the value of their clients. NSBA claims that, unlike the major lenders, they never allow changing the terms of the service at any time and any reason. Today The National Small Business Association believes in and waits for the injection of fairness and competitive principals into the credit card industry.
In August, 2008, nearly 2/3 of all small business card owners confessed that their credit card terms changed for no evident reason. Well, this is only partly true because some mistakes like late payments were obviously committed.
Reminding you, the Credit Cardholders' Bill of Rights Act does allow card companies to continue with risk-pricing measures. But, prohibiting the predatory practice of hiking the rates on any current balance, the bill will still allow rising interest sky-high on 30-day late accounts.
The National Small Business Association blames the root of the problem, not its consequence. As they believe the unfair pricing is based on the wrong approach to risk assessment. Why should the issuer offer high limits and low APRs to people whose paying abilities were not properly estimated? The right risk assessment should be done before a new business card is issued and should rule out adjusting the terms after the cardholder makes a big debt. The debt then accumulates as the business owner may not have foreseen and so prepared for additional expenses to cover higher monthly payments.
New business credit cards are expected to be not so critical. The Credit Cardholders' Bill of Rights would get lenders to maintain the terms of the original agreement and restrict them from using petty mistakes like one day late as the ground for increasing the interest rates.
NSBA looks at the consequences of easy mortgage and credit cards which they think can substitute one for the other. Some people pay mortgages with plastic cards, while some are trying to get relief from the extortionate 30% interest rates through home equity loans or home equity lines of credit.
There should be a law taking out this mess out of the credit market. With the proper assessment who can and cannot be approved for a certain card application, not only businesses but ordinary consumers will get the fair set of card benefits and will manage their credit lines more efficiently and less risky.
As to small business card owners, they believe the favorable terms should apply as long as they follow the principles of wise financial decisions: making few applications within short period of time, using grace periods, paying bills online, restraining from cash advances and avoiding late payments.