Risks Lurk in Business Credit Cards

A business card has a number of attractions. These cards come with a larger credit. Statements from these cards can be easily used to track business purchases made for taxes. Office supplies can be bought sans any hassle and much more. However, for small business owners, these business cards come with their own kind of risk. These pieces of plastic are not sold with identical protections as personal credit cards. Hard lobbying by banking interests compelled the United States Government to exclude them from the 2009-made Credit Card Act. This law protected the user from predatory practices performed by credit card issuers. Small business shareholders thus become vulnerable to everything- from an unpredictable rate increase to always shifting due dates.

Greater interest rate

The biggest problem linked with business credit cards is the steeper interest rate. The latter could be super high. Most banks charge 16 percent or more. Credit score influences a large deal, climbing up to 29 percent rate of interest or even higher. Due to Federal Reserve raising an important benchmark interest rate a year ago (2016), credit cost went up in 2017.

Terms can be changed in a jiffy for the business credit cards. The Pew Charitable Trusts in 2011 took note that 80 percent of the total business card issuers made sudden changes in card agreement terms. These are not possible with regular personal cards. Due dates can also be changed in a business credit card. Unlike personal credit cards, a different due date can be set. The window of making payments could be thus lost.

Credit card issuer penalties

There could be a number of other penalties as well. In case you cannot repay within a due date, the issuer of the business card could quickly increase rates on the complete balance. Unlike interest rate on personal credit cards, where rates cannot be increased until you are 60 days overdue, the business credit card company could increase the card rate, and a penalty could be imposed on you. You could even be imposed with penalty APR if you are late in paying by even one day. Another overlooked abuse of business credit cards is the liability accrued due to purchases made by employees. It is thus important to track what your employees have bought. The card issuing authority has written policies on what these cards can be utilized for. It is to be remembered that you will be liable for all the purchases made.

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