CARD Act Doesn’t Protect Your Business Credit Card

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When Congress enacted the CARD Act, legislation that protected consumers from unfair treatment by credit card companies, Washington was praised for enacting real world legislation that would have effects that would be felt by anybody using a credit card but does the CARD Act protect small businesses? The answer is simple: It does not and this has some small business owners upset.

Small business credit card use has gone up sharply since the economy softened in 2008. It is now reported that 80% of small businesses use credit cards as part of their day to day operations. As a small business owner or somebody who plans to open a business remember that businesses large and small who over leveraged themselves are many of the businesses who have closed their doors.

This is where the problem lies. The CARD Act doesn’t protect businesses from sudden interest rate changes. With as little as 45 days notice, a credit card company can raise your business credit card’s interest rate adding a significant amount to your monthly budget if you’re holding a balance. This has some business owners worried.

What Can You Do?

If you’re starting a small business, you may need to use a business credit card for short term funding needs but you should never, as part of your funding solution, rely on a credit card. Don’t start your business until you have enough cash saved to open it without debt. Although there are bills being proposed to extend the CARD Act to business credit cards, you don’t want you budget partially in the hands of a credit card company.

Second, use a personal credit card instead of a business credit card. Beware though. If you formed an LLC or Corporation, using a personal card for your business may open you up to personal liability if your business has future credit problems or is the target of legal action. If you are a sole proprietor, using a personal card will be fine for you.

The downside to using a personal credit card is that often the interest rate is higher and the credit limit is lower which makes using it for business more limiting but if you believe you will hold a month to month balance, it might be the best choice to avoid sudden interest rate hikes.


If you’re a small business owner, limit your use of credit cards as much as possible and remember that if you’re starting a new business, make plans that assume that a credit card isn’t a viable option to pay expenses.