Business Credit Cards Not Protected By CARD Act

Sorry, small businesses, the much ballyhooed protections of the CARD Act do not cover your credit cards. Only consumer credit cards get safeguarded against the most punitive of the old interest rate and fee policies. No wonder credit card solicitations to small business owners have increased 256%, vs 29% for consumer credit cards – they’re more profitable now.

Small businesses owners might think about using their consumer credit cards instead, however, that would mean they wouldn’t be able to write off interest payments as a business expense on their taxes.

Business Cards Not Covered by the CARD Act [LowCards]

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  1. TuxthePenguin says:

    “Small businesses owners might think about using their consumer credit cards instead, however, that would mean they wouldn’t be able to write off interest payments as a business expense on their taxes.”

    I’ll make anyone here a deal. Anyone at all. Send me $100 and I’ll send you back $35. Any time, any way, any how. As soon as that $100 hits my bank account and clears, I’ll send you back the $35 no more than 15 months later. Sound like a great deal?

    No, its not a great deal. If you can choose between a card that charges 15% interest and 20% interest – and you must carry a balance – use the 10% card all the time. Period. Screw the extra deduction on your taxes. You come out ahead in the end.

    Sheesh. When will people learn…

    /CPA rant off

    • keepher says:

      Its not just small business’ that are getting the upsell to the business card. They offered me one with a very low interest rate. Problem was the person on the phone couldn’t answer any of my questions. The result? Thanks, but no thanks.

      And once you delve deeper in to it they can jack that low interest rate up to the stratosphere whenever the mood strikes them.

    • mac-phisto says:

      If you can choose between a card that charges 15% interest and 20% interest – and you must carry a balance – use the 10% card all the time.

      exactly.

      • TuxthePenguin says:

        Yeah, I went back and changed the lower one up to 15% because I thought 10% was too low to be reasonable. I didn’t catch the second reference to it.

        But the point still holds.

        • mac-phisto says:

          it’s all good. i kind of have a problem with your point, though. the way most small businesses are structured, any income not offset by qualified expenses is taxable. so, it’s not a matter of getting $35 back from $100; it’s more like spending $125 instead of $100 (b/c in addition to each $100 of expense that you could deduct, you’ll be paying the tax on the $100 of income that you would have been able to offset with an expense.

          in this respect, if you make over $34,000 in income, it would still be a better deal to finance at 20% interest than pay the 25% tax on the money that normally wouldn’t be taxed at all.

    • MaxH42 thinks RecordStoreToughGuy got a raw deal says:

      I want to print out your “deal” offer, and when someone talks about how you shouldn’t pay off your mortgage early because you’ll “lose” the mortgage interest deduction, wrap it around a stick and beat them with the stick.

  2. chaesar says:

    I thought politicians love “supporting small business”

    • ARP says:

      No, they’re just a political football to justify their policies. I’m not sure how effective it would actually tell the trush “large corporations that contribute to us want more money and so here’s my bill to give it to them.”

  3. XianZhuXuande says:

    Could be a good thing, overall, for responsible business card holders. Might amount to better rewards. Would suck for someone without some familiarity to the system or who struggles making credit card payments. I don’t feel bad to read this news in relation to my own business cards.

  4. joecoolest says:

    Unless tax laws have changed SMB owners CAN use their personal (consumer protected) cards and still write off the interest. They just have to make sure that they use separate cards for business expenses and personal expenses. If they carry balances for both categories of expenses.

    I haven’t carried balanced in years (other than the now non existent low interest transfers that were just too good of a deal to pass up) so it’s a non issue for me. Bottom line it doesn’t matter what type of credit card it is… all that matters is that you aren’t trying to claim interest deductions on personal expenses. Hence using the different cards.

  5. energynotsaved says:

    If you receive a invite for a card and you check or acknowledge that you are going to use it for business, then you get the “business” card . You have just lost ALL your personal protection. Just watch out.

    As they use to say in Hill Street Blues, ‘be careful out there”.

  6. Graymalkin56 says:

    I’ve been inundated with offers for small business credit cards lately, which puzzled me no end because I don’t own or operate a business. Now I know why.

  7. AllanG54 says:

    I get about 10 offers a month for a business card. Mostly from Cap One and Chase Ink. The rates aren’t bad and they usually offer from 6 months to a year interest free. The thing is, in the fine print it says you can only use the card for business purchases. My total business purchases come out to about $1500 a year and I don’t carry a balance on my cards so I never bothered accepting the offer.

  8. Lenin's Tomb says:

    I had business cards; issued for my employer. When they went belly up, suddenly I was liable for everything, not just the cards I had but EVERYTHING, six figures of debt. I never even carried a balance on my personal card. What followed is three years of hell, I followed the FDCPA and the FCRA to the letter. Either the debt would get re-sold to another z-grade collector or, in one case, I got a letter from some scumbags in Michigan that I could not use any sort of Consumer protection.
    Want to know the best part? None of these stupid, assinine cards showed on “personal credit report” until my employer stopped paying on them. Fraud, outright, total fraud. I just got out of a BK 7 because of it. No personal debt at all. None. All of it was debt from my former employer. All of it.
    American Express, Chase and Citibank, especially Citibank, are, in my mind, the scum of the Earth. Mafia, loansharks, who pretend to be legal businesses.
    Best part is? Still no personal debt outside student loans.