News Release

Business Credit Cards: Liability without protection

San Francisco, CA - Today CALPIRG Education Fund, a statewide consumer advocacy organization, warned Californians to think twice before responding to one of the millions of business credit card offers that are mailed out to California households each year.

“All credit is not created equal,” according to Jon Fox, CALPIRG Consumer Advocate.  “Consumers should be aware that the new protections against unfair or deceptive practices for their personal credit cards don’t apply to their business credit cards.”

In 2009 Congress passed the CALPIRG-supported Credit Card Accountability Responsibility & Disclosure (CARD) Act in an effort to protect consumers from unfair, precarious, and opaque credit card regulations. Today consumer credit cards are protected from the most deceptive credit practices – such as changing pricing structures, automatic penalty interest rate hikes, and hidden or unpredictable costs. Yet the protections provided by the CARD Act do not cover credit cards when used  for business transactions, whether by a small family business or large corporation, or when the credit card is issued to a business entity.

Business credit card holders may be personally liable for account charges otherwise prohibited by the CARD Act, such as added interest rates on existing balances. (See comparison chart below).   “Whether you use a personal credit card or a business credit card, the liability and risk to personal finances are the same yet the consumer protections are not,” said Jon Fox.

A recent report by the independent Pew Charitable Trusts noted that every month American households received over 44 million business credit card offers.  Most of these card offers included terms that would be illegal if attached to a personal credit card. Without limits on penalties or interest rates, credit card companies can demand hundreds of dollars more in fees from consumers than they would be able to with a CARD Act protected account.

“Given the differences in credit card regulation, consumers could end up paying significantly more with ‘business’ credit cards then they would with a card protected under the CARD Act,” warned Jon Fox.

CALPIRG recommends consumers carefully asses the different offers  pitched by credit card companies, and decide what best suits their own needs and circumstances.  Specifically, consumers should consider the following:

  • Compare offers – some credit card providers voluntarily apply many of the CARD Act protections to business cards. For example, several lenders have eliminated penalty interest rates and late fees and do not penalize cardholders for going over their credit limits.
  • Avoid personal liability – register your business credit cards under your corporate entity and do not personally guarantee charges made on the card. 
  • Ask your bank about a credit line - interest rates on credit lines are significantly lower than credit cards.  If you can qualify for a bank line of credit, your costs of financing will be much lower than if you use a credit card.Be aware of your credit behavior - use your business credit card for work-related purchases only and avoid making non-business purchases on it. Pay off your business credit card first, as interest rates and fines may increase unexpectedly.

“It’s important people realize the differences between business and individual credit card accounts” noted Jon Fox, adding “You should always read the fine print, but you might want to read it twice if the card is for your business.”

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The California Public Interest Research Group Education Fund (CALPIRG) is a result-oriented public interest group that protects consumers, encourages a fair sustainable economy, and fosters responsive democratic governance.

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