Home-based travel agents accustomed to using their credit cards for expenses now have a new option: This week J.P. Morgan Chase & Co.'s Chase Card Services formally launched four cards aimed at small-business owners, including a charge card that would require customers to pay in full every month.
It's a sign that credit conditions may be starting to thaw. Small-business owners have been among the most severely hurt by the credit crisis, as banks, faced with rising losses, have pulled back from offering them credit. Advanta Corp., a major issuer of small-business cards, exited the business earlier this year.
"We're starting to see a real stabilization that we think is a harbinger of the turnaround," says Richard Quigley, president of Chase Business Cards. While Chase plans to be "prudent" in its underwriting, the company is more optimistic about small businesses' prospects than it had been in 2007, he says. "It's really going to be small businesses that are going to help pull the U.S. out of the recession."
The new cards reflect Chase's attempt to pitch cards to different types of small-business owners. For example, Chase's Ink Bold card—the first charge card offered by a Visa or MasterCard issuer—is aimed at business owners who want to avoid paying interest charges. The card comes with a variable credit line that automatically adjusts to consumers' spending patterns. Annual fees are $95, although the first year's fee is waived.
Other cards in the portfolio include:
• Ink: Offers flexible payment options, online expense management, unlimited rewards points, no annual fee, employee spending controls.
• Ink Plus: Offers features of Ink card, but with additional travel-oriented rewards; $60 annual fee after first year.
• Ink Cash: Similar to other products, but oriented more toward customers who favor cash-back over rewards points.
Ink Bold, Ink Plus, Ink and Ink Cash customers all earn one point for every dollar spent on all purchases with no limits. Ink Cash customers can also earn an additional 3 percent on business-related purchases, specifically fuel, dining, home improvement and office supplies. The small-business cards also allow users to track and report their business expenses online and add additional cards—and set spending limits—for employees at no extra cost.
"There doesn't seem to be much that credit-card issuers are doing to meet the needs of small business," Quigley said.
Chase is betting those owners will be the first to embrace optimism about economic recovery—and will need the financing to help them.
In recent times, credit cards have become the primary financing tool of small businesses, but also a potentially painful one. A survey this year by the National Small Business Association found small businesses' use of cards had risen from 49 percent in 2008 to 59 percent in April.
At the same time, 75 percent reported that their credit-card terms had worsened in the last six months, and 33 percent said their credit limit had been reduced. In December, 50 percent reported paying off their credit cards each month. By April, that number was down to 40 percent.
The move by Chase could help JPMorgan diversify its card business, in a time when credit losses and a new law limiting interest rates and fees are denting the division.
JPMorgan CEO Jamie Dimon has estimated the bank's credit card business will not be profitable until 2011. In addition, Chase has forecast the new credit-card legislation that will enter into effect in February could trim revenue by $500 million per year.
JPMorgan currently is the biggest issuer of Visa branded credit cards and the second-largest issuer of MasterCard branded credit cards.
