Finances

Business & Consumer Credit Cards are not Created Equal

April 26, 2012

In recent years bank loans and other conventional credit resources have been harder for many businesses to access. As a result, use of business credit cards has risen dramatically, especially for small businesses. Although they can be a handy way to help manage cash flow, there are a number of pitfalls to using company credit cards that you should be aware of.

Some business owners believe that their company credit cards follow the same rules as consumer credit cards. In fact, provisions of the state and federal laws that protect consumer credit cardholders do not apply to business or commercial credit cards.

As a result, business users of credit cards should be aware of these differences:

Interest Charges on consumer credit cards cannot be raised in the first year of issue. After that the credit card company must give 45 days advance notice of any interest charge changes. Business credit card issuers, on the other hand, can change rates whenever they desire, with no advance notice required.

Past Due Penalties for consumers require the account be at least 60 days delinquent. Business card holders can be hit with penalty fees and automatic interest rate hikes if an account is even one day past due.

Liability For Fraudulent Use of consumer credit cards is limited by law to $50. Business credit cards have no such protection, so if your card is lost or stolen you could be liable for all charges.

Often business credit card issuers have policies that address some of these and other concerns. However, each credit issuer is free to set its own rules and may offer a variety of business credit cards, each with its own policies. So take a look at the credit cards you use and shop around for the best terms when applying for a new card.