New Small-Biz Credit Card Survey

May 10, 2011

While the U.S. Congress was crafting and considering the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009, NSBA argued that its protections against the most egregiously “unfair” and “deceptive” practices of the credit-card industry also should be extended to small-business credit cards.

NSBA maintained that—for the most part—the cards used by small-business owners essentially were “personal” cards, since the small-business owner usually was personally liable for the card, even if they were used for business purposes.

NSBA also pointed out that by failing to explicitly extend the consumer credit cards protections contained in the bill to small-business credit cards, Congress inadvertently would provide issuers with an incentive to push consumers into these unprotected accounts.

Congress ultimately failed to heed this warning, but a new study from CardHub, a Website aimed at helping individuals locate the best credit card for their needs, has confirmed its validity.

In its “Small Business Credit Card Study: CARD Act Protections,” Cardhub found that only one of the ten major credit-card issuers proactively extended the CARD Act provisions to their business credit cards.

The study evaluated the issuers on those protections it deemed most useful to small-business owners, assigning the following weight to each relevant protection:

•   An increased interest rate/penalty APR cannot be applied to an existing balance unless the cardholder is at least 60 days delinquent: 40 percent

•   No double cycle billing: 15 percent

•   No universal default: 15 percent

•   Issuer must provide 45 days notice before changing terms of card agreement: 15 percent

•   The amount of a payment that is above the minimum must be applied to the balance with the highest interest rate: 15 percent.

The study then assigned a score to each issuer, ranging from 0 to 100, based on their business cards’ compliance with these CARD Act protections. Issuers that declined to participate or provided incomplete responses were assigned scores of zero. It also rated the issuers on their transparency.

Bank of America was the lone top-ten issuer to extend all of the consumer protections contained in the CARD Actto their small-business cardholders. Capital One was rated the second best issuer in terms of voluntary compliance with a score of 60, and American Express was third with a paltry score of 15. The remaining seven of the top ten issuers all received zeros or declined to participate in the study.

Echoing NSBA, Odysseas Papadimitriou, chief executive officer of Card Hub and a former executive at Capital One, said, “Small business owners get the worst of both worlds: They’re fully liable and they’re fully unprotected.”

Thankfully, legislation that would remedy this situation has been introduced. The Small Business Credit Card Act of 2011 (H.R. 1137), introduced by Rep. Nita Lowey (D-N.Y.) and ten cosponsors, would extend the protections previously codified by the U.S. Congress to the credit cards used by small-business owners with 50 or fewer employees.

It is critical that this legislation receive additional support. Please take a moment right now to ask your representative to sign on as a cosponsor to the Small Business Credit Card Act.

Please click here to learn more about the “Small Business Credit Card Study: CARD Act Protections.”