Watch your mailbox. You could be getting applications for small business credit cards – even if you aren’t a business owner. A recent Wall Street Journal article points out that card issuers appear to be increasing their marketing of business cards – even to consumers who work for someone else. Sometimes camouflaged in vague terms like “professional” cards, these cards come with a serious disadvantage for the cardholder:

 

That means issuers can raise rates with little advance notice (and apply them retroactively), charge higher penalty fees, play with floating due dates, and do all those fun things they used to do with consumer credit cards before those tactics were outlawed. 

So why on earth would anyone want a small business credit card? Believe it or not, there are a few good reasons:

Business Card Pros:

Protect your personal credit scores. With the notable exception of Capital One, which has chosen to report business card activity on personal credit reports, most business credit cards aren't reported on personal credit reports unless you default. That means if your business can't afford to pay the bill in full each month, the fact that you are carrying a balance won't weigh down your personal credit scores. (Speaking of credit scores, you should expect to see an inquiry on at least one of your personal credit reports, since most of these cards require a personal credit check.)

Separate your business and personal finances: If you actually do own a business, keeping your business and personal purchases separate can be crucial for tax purposes. Having a dedicated business card makes this easier, though another alternative would be to use a personal card strictly for business purchases. Again, though, the activity on a personal card affects your personal credit scores, for better or for worse. 

Rich rewards:  You may find richer rewards on some small business credit cards. American Express, for example, is well known for both catering to small businesses, as well as offering solid rewards. The CitiBusiness AAdvantage Visa card gives 30,000 AAdvantage bonus miles if you make $750 in purchases the first four months. That's not hard to do if you are funding a new business.

Business Card Cons

Open yourself to the old tricks and traps. You can read our Consumer Guide to the Credit CARD Act here if you want more details about the practices that Congress banned on consumer cards. But I'll say it again: The CARD Act does not apply to business accounts. And that includes cards marketed to non-business owners as “professional” cards – at least for the time being. (I can see the new Consumer Financial Protection Bureau having fun with this one.)

Note: Bank of America has stated they will extend many of the Credit CARD Act provisions to their business cards. A Capital One spokesperson is quoted in the WSJ article as saying that Capital One has applied many CARD Act protections to its business cards, but when I look at their web site, their card offers still list penalty fees that are now illegal on consumer cards.

We've said it before and we'll say it again. Just because the CARD Act protections are in place doesn't mean we can rest easy. There are still plenty of traps to watch out for.

 

You see a small charge on your credit card you don’t recognize.

What do you do?

Small charges you don’t recognize can be a sign of a bigger problem. The New York Times takes a look at a lawsuit filed in March by the Federal Trade Commission, which claims that during the past four years, scammers raked in more than $10 million by putting small bogus charges – ranging from twenty cents to $9 – on consumers’ credit and debit cards. And in a scheme that apparently has dragged out for more than a year, scammers have made fake $1 purchases on iTunes customers' accounts, only to follow up with increasingly larger ones, sometimes totaling hundreds of dollars.

An unknown charge could mean your account was compromised. Or it could just be that you don’t recognize the name of the company billing you for a purchase you made. After all, merchants have a limited number of characters with which to describe their products and services on statements, and those descriptions can be cryptic.

So what should you do when you find an odd charge on your credit or debit card statement? Here’s how I would handle it:

1.    Call the merchant to find out whether the charge is for an item you actually purchased. If the phone call doesn’t clear it up,

2.    Call your credit card company and file a dispute.

3.    If you believe your card number has been compromised – especially in the case of a debit card – cancel the card and ask for a replacement with a new number.

Remember, under the federal Fair Credit Billing Act, the most you can be held liable for is $50 in unauthorized purchases, and that's only if the card was physically presented in the transaction. Most card companies won't even hold you responsible for that if you notified them of the fraud promptly.

However, you have to read your statements to identify fraudulent charges – especially the small ones that are easy to overlook.

We're wrapping up our week long series on the Credit CARD Act.  For those of you just joining us, we've been gearing up for the final changes that are scheduled to go into effect on Aug. 22.

So far we've covered all of the major provisions that have gone into effect to date, including what you need to know about interest rates and account changes, fee restrictions, student protections, and enhanced consumer disclosures.

The final section of the Act relates to how your payments are allocated, statement mailing requirements, and billing cycle changes.  Here's what you need to know:

• Credit card issuers are required to mail your statement at least 21 days before your payment is due and your monthly due date must be the same date each month.


• Double-cycle billing, or the practice of calculating interest charges on both the current balance and the previous month's balance, is prohibited.


• Any payment over the minimum balance due must automatically be applied to the highest interest balance first.

What you need to know: Before a credit card issuer can open a new account, they must first take into account your ability to repay. A card issuer cannot open a new credit card account, or increase an existing credit limit, unless they first consider your ability to make the required payments under the terms on the account.

There's no question that the CARD Act is a great step forward for consumer protection, but we have one final phase left to go. The remaining provisions will go into effect on August 22, 2010, and include the final rules that limit fees on gift cards and also gives consumers the right to earn back their previous interest rate if they are able to make continuous on time payments for 6 months.  Join us on Monday, where we'll review the final provisions and wrap up the final chapter in this series.

We're wrapping up our week long series on the Credit CARD Act.  For those of you just joining us, we've been gearing up for the final changes that are scheduled to go into effect on Aug. 22.

So far we've covered all of the major provisions that have gone into effect to date, including what you need to know about interest rates and account changes, fee restrictions, student protections, and enhanced consumer disclosures.

The final section of the Act relates to how your payments are allocated, statement mailing requirements, and billing cycle changes.  Here's what you need to know:

• Credit card issuers are required to mail your statement at least 21 days before your payment is due and your monthly due date must be the same date each month.


• Double-cycle billing, or the practice of calculating interest charges on both the current balance and the previous month's balance, is prohibited.


• Any payment over the minimum balance due must automatically be applied to the highest interest balance first.

What you need to know: Before a credit card issuer can open a new account, they must first take into account your ability to repay. A card issuer cannot open a new credit card account, or increase an existing credit limit, unless they first consider your ability to make the required payments under the terms on the account.

There's no question that the CARD Act is a great step forward for consumer protection, but we have one final phase left to go. The remaining provisions will go into effect on August 22, 2010, and include the final rules that limit fees on gift cards and also gives consumers the right to earn back their previous interest rate if they are able to make continuous on time payments for 6 months.  Join us on Monday, where we'll review the final provisions and wrap up the final chapter in this series.

All week long we've been reviewing the major provisions under the Credit CARD Act and what they mean for you.  So far we've covered the new laws governing interest rates and account changes, fee restrictions, and student credit card protections. Next on the list we're covering the new consumer disclosure rules.

Not only does this section of the law help provide a much-needed level of transparency in regards to the time it takes to pay off credit card debt, it also put an end to one of the most popular (and annoying) marketing campaigns of all time.  You know the one, featuring a group deadbeat 20-somethings living in their parents basement and singing a tune? Yep, thanks to enhanced consumer disclosures, those deadbeat 20-somethings are looking for a new gig.  Here's what the enhanced consumer disclosures mean for you:

• Your credit card statements must now include a minimum payment disclosure that explains how long it will take you to pay off your existing balance as well as the total cost in interest if you only pay the minimum amount due each month. Additionally, your statement must include the monthly payment required, and interest cost, to pay off the existing balance in 3 years.


• Your credit card issuer must provide easy online access to the cardholder agreement for your account. Likewise, all credit card issuers are required to submit cardholder agreements to the Federal Reserve, which will act as the central repository. Find your credit card agreement with the Federal Reserve Consumer Credit Card Agreement Search tool.


• Companies that advertise "free" credit reports must disclose that the report being offered is NOT the free credit report provided under Federal law at AnnualCreditReport.com. (Read the FTC Amendment)

What you need to know: If your credit card issuer raises your interest rate, they must tell you why. This means if the increase is due to market conditions, increased credit risk due to credit scores, or a decline in credit worthiness – they must provide up to four the reasons for the increase. Under separate legislation, issuers will also be required to provide consumers with the credit score used in making that decision. The effective date for credit score disclosures has not yet been determined.

How do you feel about the new payment disclosures? Were you surprised by how long it would take to pay off the balance by only making the minimum payment? Do you think the 3 year payment disclosure is helpful? We want to hear what you have to say.  Share your thoughts in the comments section below.

Join us tomorrow as we wrap up our week long series on the Credit CARD Act and prepare for the new laws that go into effect on Aug. 22 - just a few days away.