Small Business Credit Card Issuers: The Good, The Bad, and The Ugly

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.

The Good

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

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.

The Ugly

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.

REWARDS CREDIT CARD RECOMMENDATIONS

Barclaycard World Master Card: If you are an avid traveler and looking for a travel rewards credit card, you can sign up for the Barclaycard Arrival World MasterCard with no annual fee with double the points on travel and dining and 20,000 signup miles ($200 value). Barclaycard offers $200,000 in automatic travel accident insurance, reimbursement for expenses if your bag is lost or delayed, trip cancellation coverage, and $0 fraud liability.

Discover Credit Card: Are you looking for the best credit card for balance transfers, flexibility, and rewards? Check out the benefits of the Discover it® credit card and maximize your purchasing power. You can earn 5% cash back rewards without any annual fees, over limit fees, or foreign transaction fees. Discover provides 90 day price match guarantee, 90 days return guarantee & full refund if the product is stolen within 90 days. And did you know Discover has been ranked #1 for customer loyalty for 17 years in a row? Discover it cards are accepted at over 9 million merchants nationwide and their U.S. based customer service team is available 24/7. Just remember to spend within your means!

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?

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. David M says

    Business credit cards are a great way to get extra sign up bonuses. My wife works for herself – last year we got the personal and business Chase United Credit Card and got Bonuses on BOTH.

    I noticed nothing else different as we did NOT use the business card for her business!

  2. krantcents says

    Although I had business credit cards in the past, I never carried a balance. I would use a separate line of credit for cash flow purposes. It was cheaper and more convenient. The credit card was used for tracking of expenses, rewards and convenience. The main difference was the company name was above my name on the card. Since I was not a corporation, I knew I was personally liable for the card. I have used American Express and United Airlines Visa.

  3. Sunil from The Extra Money Blog says

    i own a small brick and mortar business and have instructed managers to charge all business expenses on the cc. expenses are going to be incurred anyway, so why not benefit from the reward pts? it funds all travels for me, my family and my friends for free all year long.

  4. JT McGee says

    I don’t have a lot of experience with business credit cards, but having looked into them the barriers to get them have definitely gone up. Most major issuers now want a personal guarantee for small businesses, which means you’re on the hook if you go belly up!

  5. Barb Friedberg says

    I use a business credit card for my expenses related to my job as a portfolio manager. Since no one carries a balance, I didn’t consider it any different than my personal cards. Of course, every charge on the business card is deductible for the business.

  6. Chris Parsons says

    I have both business and personal credit cards with Chase. The only difference I’ve noticed is that they are more stringent about credit limits on the business credit card, which doesn’t make sense to me as I’m personally liable either way.

    Why are banks more restrictive on business credit?

    What benefit is there to a business credit card instead of a personal one?

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