We all know the old adage, “you can’t judge a book by its cover.” What you might not know is that banks apparently had this in mind when branding business credit cards. You see, one would think there’d be significant differences between general-consumer and business credit cards. However, according to a recent Card Hub study, the only thing that really distinguishes a business credit card from a general-use card is the fact that a company is liable in addition to an individual cardholder.
Oh, and the fact the new credit card law (CARD Act) only applies to consumer credit cards. In light of this, a clear hierarchy of business credit card issuers actually emerges when you compare the extent to which issuers recognize the bond between consumers and business credit cards and in turn proactively apply CARD Act protections to these spending vehicles despite their branding.
Ultimately, you are left with a list of the good, the bad and the ugly business credit card issuers.
While Capital One and American Express fall in the “good” category thanks to their transparency and the steps they’ve taken to apply certain important CARD Act protections to business credit cards, neither compares to Bank of America. In contrast to other recent moves by the company, Bank of America leads the business credit card market on the merits of applying every major CARD Act protection to its business-branded spending vehicles, including the provision against increasing interest rates on existing balances unless an account is 60+ days delinquent. Bank of America therefore provides small business owners with much-needed debt consistency and expense tracking capabilities together with the simplicity of a single credit card. No other issuer can make such a claim.
The “bad” category is made up of issuers who failed to apply a single major CARD Act provision to their business credit card offerings. The only saving grace for Chase and Discover is that they’ve voluntarily reworked their business credit card statements to reflect CARD Act mandates and they were transparent about their policies. Citi, hanging by a thread, can only say that it’s transparent.
To borrow from The Hangover, we call this place “Loserville,” and its residents are Wells Fargo, HSBC and U.S. Bank. Not only did each of these issuers fail to apply a single significant CARD Act protection to its so-called business credit cards, but none of them would even content on their policies with a modicum of transparency.
There are a few conclusions we can make as a result of these findings. First, the credit card operations at Wells Fargo, U.S. Bank and HSBC seem not have the underwriting sophistication to succeed without secrecy and gotcha-type tactics. What’s more, these issuers clearly do not possess the foresight necessary to realize that the extension of the CARD Act to business credit cards is inevitable and that proactive adoption of the law is preferable to federally-mandated change.
The Fed and the new Consumer Financial Protection Agency have made it clear that they are dedicated to protecting the new credit card marketplace, and until issuers learn to self-police, the chances for additional regulation are rather high. Finally, the lack of vision within these banks not only puts customers at a disadvantage, it also signals fundamental organizational issues that could hurt their performance moving forward.
Until more banks get with the program, small business owners have two choices when looking for a credit card with which to carry a balance. They can use either a Bank of America business credit card or any general-use/consumer card. That way you won’t be taking the risk of seeing the cost of your debt suddenly rise. There is simply no reason to settle for anything less than the best when your business’ debt costs are on the line. Of course, when it comes to purchases that will be paid for in full by the end of the month, the distinction between business and general-use credit cards isn’t that important, and your key considerations should instead be rewards benefits and expense tracking capabilities.
FAVORITE CREDIT CARDS
Barclaycard® Ring MasterCard® – 1% Back on Balance Transfers – This great card has the lowest APR I’ve seen in the market today at 8% compared to the average credit card interest rate is 15%. You get 1% back on all balance transfers made in the first 60 days of opening an account and there is no annual fee or balance transfer fee. There’s a fantastic social community of Ring MasterCard holders once you join to interact with and save money.
The Hawaiian Airlines® World Elite MasterCard® – Hawaiian Airlines is hands down the best airlines in America. Their service is impeccable, they provide food, snacks, and drinks included in your air fare, and each seat comes with a USB charger. This Hawaiian Airlines card gives 35,000 bonus miles if you spend $1,000 within the first 90 days, gives you one complimentary bag to check-in, and a one-time 50% off discount off your companion’s air fare! Round-trip ticket prices range from $450 – $1,200, so that’s a $225 – $600 savings right there to paradise! You also get $100 off a companion tick for roundtrip coach travel between Hawaii and North America each year, 1 point for every $1 spent, and 5,000 annual bonus miles after $10,000 in annual spend. The annual fee is only $89. Oahu is my home state and it is the most beautiful place to vacation!
Check Your Credit Score: Take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance. The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Do you know what your score is?