Small businesses are most often affected since they use individual cards. The small business credit cards that are on offer now are not covered by consumer protections as per the Credit Card Accountability, Responsibility and Disclosure Act of 2009.
Though the so-called business card offers might sound tempting especially for those with small businesses, they come with a host of disadvantages. Since they are not governed by the rules of consumer protection, issuers can at their discretion raise the rate of interest and slap a huge penalty for missing a payment.
Issuers might have found a way to work around the CARD act after all. For, they seem to be offering the business credit cards to those individuals who do not run a business of any kind.
As per the new law, the issuers are required to send the bills to cardholders at least 21 days prior to the payment due date. There are also limitations to late payment fee which is $25. As per the law there should be no hike in interest rates for a period of one year after the issuance of the card. However, these rules are not applicable to business cards. Hence, business people should be aware that not all business cards are friendly in spite of their tall claims. No two business cards are similar and they could have a very high fee structure.
For instance, though the Bank of America that most of its terms and conditions will reflect the regulations as per the CARD Act. No hike in interest rates on the existing balance, but, a 45-day notice period would be given in case of hikes in future. Excessive payments made above the minimum would go towards balances at the higher rates. However, not all CARD act regulations would be applicable and the late fee charges would be based on the balance.
College students are technically not supposed to be issued a card without a co-signatory. However, students have found loopholes in the system and use devious means to get hold of the plastic by claiming college loan as part of the 'income' and issuers accepting this claim.New rules for card holders:
- A late fee of about $25 could be charged on individual cardholders. If any of the last 6 payments are delayed then charges could be hiked to about $35. Issuers can justify the penalty as per the Fed Reserve.
- The penalty fee cannot exceed the amount violated.
- No fee can be charged for inactivity.
- Late payments would attract higher interest on purchases in future and rates can be increased after a 45-day notice period.