Are your representatives pro-small business? They would probably tell you so, but we all know that politicians these days are full of more hot air than the Hindenburg and would rather talk at length than actually cross the aisle and get something substantial accomplished. But with Rep. Nita Lowey having recently introduced the Small Business Credit Card Act of 2013, they now have a major chance for redemption.
Despite the fact that credit card companies pull personal credit reports when evaluating small business credit card applications, report account information to users’ personal credit reports, and hold them personally liable for debt, the Credit CARD Act of 2009 does not apply to these business-branded products.
Why? Lobbying, of course. The CARD Act added much needed transparency to the consumer credit card market and a compromise was struck to keep it from applying across the board.
Why is it important? Most small business owners are still subject to predatory pre-recession tactics, such as double cycle billing, payment allocation policies that keep your most expensive debt around the longest, and the ability for issuers to raise interest rates on existing balances whenever they want. That last part is especially problematic because debt stability and the accompanying ability to confidently allocate funds as well as plan strategically for the future is impossible to attain when a credit card executive can arbitrarily jack up rates in order to get a salary bonus (or for no reason at all).
Only about half of all start-ups survive their first five years, according to data from the U.S. Small Business Administration, and only about one in three last a decade. What’s more, roughly 90% of small business owners use credit cards annually, and 37% use them for financing purposes. In other words, making it in small business is tough enough, especially in the current economic climate, without your spending and payment tools effectively sabotaging you.
While waiting for Congress to get around to what seems like an obviously needed legislative fix, the savviest small business owners can cobble together a nice collection of product terms and user protections by using a 0% general-consumer credit card for funding and a rewards business credit card for everyday spending. But it shouldn’t be that complicated. Small business owners shouldn’t have to jump through hoops or sacrifice selection and restrict themselves to getting one of the business credit cards offered by Bank of America – the only major issuer that has yet extended all of the most important CARD Act protections to its business-branded products.
Let’s therefore hope that a miracle happens and the Small Business Credit Card Act of 2013 gets passed.