Last May, Congress passed reforms on the Truth in Lending Act disabling credit card issuers from hiking interest rates on customers who pay their bills on time. Unfortunately, the reforms – which take effect this week – don’t cover cards used for corporate purposes, reports CNN Money.Many small business owners feel they are unjustly excluded from these protective measures. According to the source, credits cards have become an increasingly important source for fast capital throughout the recession as bank loans have been hard to come across.
Moreover, almost 60 percent of business owners polled for the National Small Business Association business credit survey say they use credit cards. The survey reveals 79 percent of entrepreneurs say the terms of their credit cards have grown worse in the past five years.
Still, it is not advisable for small business owners to switch to personal credit cards for corporate use with the hopes of benefiting from the new regulations. “Using personal cards is not ideal because it can affect your personal credit scores,” Gerri Detweiler, co-author of Business Credit Success, told CNN Money.
For business owners and entrepreneurs considering business formation, the regulations might suggest building better business credit scores is necessary – this will enable small companies to more easily obtain loans so they will not need to rely solely on plastic. Online incorporation services often provide resources for entrepreneurs looking to better their credit and increase their chances of getting a loan.