Transparency, accountability, and mutual responsibilityâ describe the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 in the words of President Obama. While this reform, passed by Congress on May 22, 2009, protects personal credit card holders from deceptive credit card practices, it continues to leave small business credit card holders vulnerable to hidden fees (late fees, over-limit fees, double-cycle billing), rate increases, and unclear language.
As a result, 18.8 percent of small businesses filed bankruptcy in 1998 due to contract and related disputes with creditors, followed by 554,000 new, small businesses closing and 35,000 new, small businesses filing bankruptcy in 2003, according to research studies managed by the U.S. Small Business Administration.
CARD Act Protections for Small Business Credit Cards
To address the need for the protection of small business credit card holders, the credit card rating company CardHub.com established a small business credit card study called CARD Act Protections. This study assigns a rating of 0-100 to the 10 largest credit card companies in the U.S. according to their compliance with the CARD Act Protections criteria. (Note that some of the credit card companies refused to participate in the study).
The five criteria included the following:
Interest-rate increases (APR penalty) no sooner than 60 days of cardholder delinquency on existing balances
Elimination of double-cycle billing
Elimination of universal default
Change in card-agreement terms no sooner than 45 days of providing notice
Assignment of payments (above the minimum) to the balance with the highest interest rate
Top Credit Cards for Small Businesses
Based on this criteria rating, one has the ability to determine the top credit cards for small businesses. Beginning with the highest rating, the top credit cards are listed as follows:
1. Bank of America Visa Business Credit Card
This small business credit card was the only one of the 10 major credit cards that scored a 100 percent rating for CardHub’s CARD Act Protections criteria. The specific features of this business card include the following:
25-day payment period
45-day minimum payment of rate changes
No rate increases on existing balances
No over-limit fees
Extended grace period on purchases
Mailing small businesses its one-page Clarity Communicationâ letter that describes its rates, fees and payment information
2. Capital One
This small business credit card met 60 percent of CardHub’s CARD Act Protections criteria. Its need for improvement was in the area of eliminating rate increases. In addition to its good CARD Act Protections, Capital One Business Platinum offers attractive membership awards to small businesses, which include the following:
No annual fee
Introductory zero percent APR; 14.99-22.99 percent variable APR
No fees for extra employee cards
One percent cash back (with no monthly minimum)
Business-set spending limits
Reward points for travel
3. American Express
Third place in meeting 15 percent of CardHub’s CARD Act Protections criteria was American Express. One of its cards that offers excellent perks to small businesses is its SimplyCash Business Card. Some of the rewards are listed below:
No annual fee
Five percent cash back on office supplies and wireless services
Three percent cash back on fuel
One percent cash back on other purchases
Employee cards with business-set limits
4. Chase
In CardHub’s CARD Act Protections study, Chase offered decent credit card transparency and agreed to begin offering some of CardHub’s CARD Act Protections such as extending payment grace periods. Of most popularity, the Chase Ink Cash Business Card offers the following membership rewards:
Introductory zero percent APR; 13.24-19.24 percent variable APR
No annual fee
Earn 2% Cash Back on Dining and Gasoline – When you buy gasoline or pay for dining out, you’ll earn an 2% cash back on the first $25,000 spent annually
Customized credit line
100 percent bonus cash back
5. Discover
Although Discover had not practiced any of CardHub’s CARD Act Protections during the study, it adopted the practices of offering a 25-day grace period between the availability and payment of a bill as well as eliminating over-limit and pay-by-phone fees. One of the most noteworthy Discover small business cards is its More (SM) Card that offers the following perks:
No annual fee
Zero percent APR for the first 15 months; 11.99-20.99 percent variable APR
Five percent cash back on first $2000 on office supplies
Two percent yearly cash back on first $2000 of gas
One percent unlimited cash back
Free employee cards
Choosing the Right Credit Card
Overall, protection is a central need that is considered in rating the top five credit cards for small businesses. After choosing small business credit cards that meet CardHub’s CARD Act Protections criteria, small businesses will see a decrease in the statistics of closures and bankruptcies among small businesses that include law offices, restaurants, convenience stores, and salons.
It is also important to note that small business Credit Card Deals are significant in that they help small businesses to establish credit, to simplify bookkeeping (card statements outline business spending), to have emergency coverage, to receive employee cards that can be monitored, and to earn rewards.
(Joy is a freelance writer for a website that is able to compare everything from credit cards to car insurance. She enjoys learning about personal finance and helping educate others about the benefits of properly handling one’s finances. If she is not learning about personal finance, she can be found playing her new Wii Fit.)
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