The Credit CARD Act of 2009, which took effect Feb. 22, 2010, won't help owners of small-business credit cards. The new law applies only to consumer credit cards.
As many as 59 percent of small businesses in a spring 2009 survey reported that they used credit cards to finance their firms during the previous year, according to the National Small Business Association, or NSBA.
Like consumers, many small firms that use credit cards have already seen negative changes to their accounts. The NSBA survey found that 63 percent of respondents reported that their interest rate increased in the past year, and 41 percent said their credit limit was reduced.
The law offers no protection from the practices banned or restricted under the law, such as rate hikes on existing balances. Issuers may or may not choose to extend the same rules to their business credit cards.
"They may even be at more risk now simply because if issuers can't raise rates on consumers, they may decide that small businesses need to help make up for that," says Gerri Detweiler, personal finance adviser for Credit.com.
Recent research from the Pew Safe Credit Cards Project found that rate increases on existing balances and "hair trigger" penalty rate increases were costing consumers at least $10 billion a year. The CARD Act reined in these practices Feb. 22.
Few choicesShifting business card spending to a personal card in order to be covered by the CARD Act may also prove a bad idea.
The Credit CARD Act amends the Truth in Lending Act, which doesn't apply to "an extension of credit primarily for a business, commercial or agricultural purpose."
In other words, piling business expenses onto a consumer credit card could render it a business card under the law. This gray area of the law could impact a lot of small-business cardholders. A whopping 86 percent of small firms say they use their consumer or business cards primarily or exclusively for business purposes, according to the 2009 National Small Business Association survey.
"The law is vague enough and specifically cards that are primarily or exclusively used for business aren't included in that," says NSBA spokeswoman Molly Brogan.