The Credit-Card Conundrum

With traditional sources of credit getting more and more difficult to obtain, for many home-based agents, a small-business credit card is used to make ordinary business purchases, cover expenses and emergency payments. On Thursday the U.S. House of Representatives overwhelmingly approved credit-card legislation aimed at protecting consumers from hidden fees and sudden interest rate hikes. But here’s the rub: Small-business credit cards were not included in that legislation.

The Credit Cardholders Bill of Rights, as the legislation is called, restricts some aggressive tactics by credit-card companies, such as arbitrary rate changes, applying payments in a way that maximizes interest charges and double-cycle billing. Why the law, as currently written, doesn’t include small-business credit cards is something of a mystery: Such cards are personally guaranteed and function exactly the same way consumer credit cards do. Yet interestingly, an amendment that would have made this change explicitly apply to cards issued to businesses with fewer than 500 employees did not make it out of committee.

Should this version of the bill pass into law, credit-card companies would have a loophole to subject small-business customers to the very tactics that ordinary consumers will be protected from. But there’s a loophole on the side of small businesses as well, as John Tozzi points out at businessweek.com: Small-business owners could just opt to use personal cards in their own name instead of small-business credit cards, since they’re essentially the same. Unless and until a small-business provision is added to the bill, that may be the way to go for home-based agents reliant on their credit cards.

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