Half Glass Full: Business Credit Cards Better Than Ever for Responsible Borrowers

If you perform an internet search on “business credit cards”, you will more than likely return a myriad of results that paint them in a bad light simply because there are no added protections for card holders under the Credit Card Accountability and Responsibility and Disclosure Act of 2009 (CARD). The legislation was designed to protect not-so-savvy consumers who may experience drastic, unexpected interest rate hikes by not-so-honest card issuers willing to take advantage of them. Many business credit card holders were surprised to learn that CARD does not protect them, and so journalists far and wide are shaking their fingers at business credit cards, warning possible applicants against the ‘pitfalls’ of applying for business or “professional” credit cards.

These naysayers are not telling you the whole story.

For responsible credit card users, now is a great time to apply for a business credit card and use the current economic slump to your advantage. The Wall Street Journal reports that after CARD was enacted, credit card issuers mailed out 47 million professional offers in Q1 of 2010, a 256% increase from the same period last year. Why the huge jump? Because business owners are tightening their belts and postponing expansions, causing credit card issuers to lose profits. In a scramble to increase their own bottom lines, card issuers are relaxing certain application criteria for business (or “professional”) credit card applicants and beefing up the card reward programs. For instance, the Ink From Chase business credit card application has been changed to help make approval easier. The same Wall Street Journal article reveals that January 2010 mailings for the Ink From Chase card required applicants to provide the name of their company, the nature of the business, its address and its federal employer identification number. Solicitations in July, on the other hand, only required applicants to check a box that said ‘Yes, I am a business owner’ or ‘Yes, I am a business professional with business expenses.’ A Forbes blog also reports that the Ink From Chase card pays 3% back on fuel, home improvement, dining, and office supplies, as well as 1% on everything else. Small and home business owners are well able to combine personal and business expenses, making this and other similar business credit cards a very attractive option for business and even personal finance.

So, despite the lack of added protection by the Credit Card Accountability and Responsibility and Disclosure Act (CARD), these new and improved professional and business credit cards with expanded rewards programs can actually prove to be advantageous for the right kind of card user.

But who is that, exactly?

If you have a good credit score, pay your balance off every month, and do not usually incur late payment fees, the current economic climate has blown the winds of opportunity in your direction. Since the lack of added consumer protection in CARD only affects credit card users who tend to carry balances and are at times delinquent in their payments, these penalties are not a major source of concern for business owners who are conservative in their spending, keep good records, and pay off their credit card bills by the end of each month (at least most months). Getting a new business credit card now, while issuers are still looking to woo new applicants, can help build your business credit score and set you up nicely for the time when banks begin offering better business loans and you are ready to expand.

Don’t let the mainstream media tell you that this glass is half empty - it’s really half full.

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No Rate Hikes On Existing Balances for Bank of America Business Cards

As a Bank of America business credit-card account holder (I actually have 2 business cards from BofA) I was very happy to read today's news: No rate hikes on existing credit-card balances. Here's a clip from a recent Charlotte Observer article:

"...Bank of America Corp. won't raise interest rates on existing balances held by its 2 million small-business credit-card accounts, the bank said Thursday.

The bank also said that those customers will get 45 days' notice before rates change on future balances. It won't charge fees when customers go over their credit limit.

Small-business credit-card customers will also receive a one-page "Clarity Commitment," which is a summary of their rates, fees and payment information. The bank has already sent such statements to customers with mortgages, home equity loans and consumer credit cards..."

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What’s Next For Small Business Credit Cards?

During the past twelve months we have seen a paradigm shift in small business lending to say the least. Once a staple of the industry, small business credit cards are now a rare find. As previously reported on this blog, banks left and right have been terminating business cards; including Advanta, Chase, and Citi. Many cardholders have also complained about higher interest rates and lower credit limits.

What’s Next?
Although there is some dispute as to whether or not the recession is over, there’s no denying that economic conditions have significantly improved since last winter. According to the United States Commerce Department, the U.S. economy grew 3.5% during the third quarter. Positive GDP growth has also been reported by some other countries, with China leading the way so far at 8.9%. If economic conditions continue to improve, we most likely will see business credit cards trickle back onto the market.

What Will Be Different?
It’s important to note that business cards are currently excluded from the Credit Card Reform Act of 2009. Therefore, it's possible we may experience the same "bait-n-switch" complaints on credit card deals in the future. That being said, due to increased scrutiny and regulation of the industry, these questionable practices will likely become far less common.

It is also likely that new cardholders won’t be granted high credit limits, at least initially. Before the economic turmoil erupted, many new customers were given extremely high limits; often in the tens of thousands of dollars. For now, it is unlikely we will see these same spending limits awarded to new accounts.

Furthermore, applicants with lower credit scores will probably not be approved. We may even see business credit card deals explicitly mention they are only seeking those with excellent credit profiles.

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Advanta Settles with The FDIC Over Fair Trade Violations

Advanta Business Credit Card

Here's some good news for all those who used to have an Advanta business credit card account. As you may already know, Advanta shut down all business credit cards accounts on May 30, 2009. No account was spared. Small business owners who relied on their Advanta credit cards to buy equipment, inventory, etc. were forced to find new sources of temporary financing in a hurry. This, of course, made lots of cardholders very angry, since business credit cards and lines of credit are not easy to find in the current credit crunch and recessionary economic environment.

To add insult to injury, Advanta also raised the interest rate on many accounts without providing fair warning. This happened with my own Advanta Platinum Businesscard account. Advanta ended my 0% intro APR period early, and without warning. Moreover, I'm still calling Advanta every week, as I'm trying to resolve a problem with an opt-out correspondence. All very vexing stuff.

So here's the good news: Advanta has settled with the Federal Deposit Insurance Corporation (FDIC) over fair trade violations related to business credit card accounts. Bottom line: if Advanta modified your interest rate without fair warning, you may eventually receive a restitution payment.

Here's a clip from Wednesday's press release:

"...Under the settlement, Advanta has agreed to an order to cease and desist, to pay restitution, and to pay a civil money penalty in the amount of $150,000. In addition, restitution of approximately $14 million will be paid to businesses that used Advanta's Cash Back Reward program and $21 million to accountholders whose accounts were repriced. In agreeing to the issuance of the order, Advanta did not admit or deny any liability.

Advanta's 'Cash Back Reward' program advertised a percentage of cash back on certain purchases by business credit card accountholders. Due to the tiered structure of the cash back payments, however, the advertised percentage was not available for all purchases. As a result, it was effectively impossible to earn the stated percentage of cash back reward payments. The FDIC concluded that the Bank's solicitations were likely to mislead a reasonable customer and that the representations were material and that therefore, the Bank engaged in a pattern of deceptive acts or practices in violation of Section 5.

In addition, numerous complaints were filed regarding Advanta's substantial annual percentage rate (APR) increases on the accounts of small business owners and professionals, who had neither exceeded their credit limits nor were delinquent in making payments on their accounts. The FDIC determined that Advanta's rate increases had been implemented in an unfair manner, that Advanta failed to adequately notify accountholders that their APR had increased, the amount of the increase, the reason for the increase, the procedures to opt-out and the consequences of an opt-out. The repricing caused substantial injury to customers, withheld and/or provided inadequate information that could have enabled the customer to reasonably avoid the injury, and provided no benefit to the customer or competition.

'The Advanta settlement demonstrates the FDIC's commitment to having banks take responsibility for ensuring that they do not engage in unfair or deceptive acts or practices in connection with the banking products and services they offer,' said FDIC Board member Thomas J. Curry. 'Any person doing business with an insured depository institution can expect to be treated fairly, and any such entity that engages in unfair or deceptive acts or practices should be aware that the FDIC will pursue such practices with all of the legal authority at our disposal.'..."

OK, so here's an example of one of the worst credit cards ever:



Yup.

I now pose this question to readers: is Advanta the worst business credit card bank ever? As always, your comments are very welcome, and appreciated.

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Chase "Forces" Me to Close My Favorite Business Credit Card

It's the old credit card bait 'n switch. The credit card banks bait you with attractive terms and generous rewards programs to get you to signup. Then, they wait. They wait for you to accumulate a large enough balance, then jack up your interest rate. I've been reading about this a lot on other websites recently; now it's happened to me, with my Chase business credit card.

Just got a snail mail notice from Chase informing me that the company is going to raise the interest rate on my favorite business credit card, from a fixed rate of 9.9% to a variable rate of (Prime + 11.99%) = 15.24%. 15.24% is now the interest rate floor for this card, since Prime is not likely to go any lower. Of course, I have the option to opt out of the change. This would cause my account to be closed, and I would then continue to pay the balance down to zero at the original 9.9% APR.

Thankfully, I'm prepared for this contingency. I plan on paying the balance off with some cash from savings and a small loan via Lending Club


I don't have to borrow any money via Lending Club to payoff my Chase business card, but I really like the idea of Lending Club -- bypassing the banks and borrowing from regular folks across the country -- and I want to go through the process of borrowing through Lending Club myself so that I can report on my experience here in this blog.

To be perfectly honest, I really like my Chase business card, but, clearly, it's time for us to part ways. With the U.S. Prime Rate at 3.25%, any rate above 10% is a subprime rate, in my opinion, and I'm not a subprime borrower. I took advantage of an excellent 0% intro APR offer with this card, and, when the 12-month, interest-free period ended, I used the cash back rewards program to lower my cost of borrowing to a nominal level.

I really like the cash back rewards program with this card. I spend money on it and reward points accumulate. Then, when points reach a certain threshold, I simply login to my account and request a statement credit. With a few business days, the statement credit is posted to my account. Easy. No forms to fill out, No waiting until the end of the year to get my cash back reward and no waiting for a snail mail check. I will miss this rewards program.

I have to hand it to Chase for being honest. In the change of terms notice they sent, they explained the change as a, "response to market conditions," and they also added that the company wants to "maintain profitability." I'm hating the change but I respect the honesty. Contrast this with the Barclay's notice I received when that credit card bank closed my BJ's Visa Card. The company wrote that it was to, "...help [me] better manage [my] credit accounts..." In other words, not only did they close my account without consulting me first, they also felt it necessary to insult my intelligence.

In other business credit card news: Citi® closed my inactive CitiBusiness® card recently. I will miss this card because:

• it had a decent credit line (~$10,000) which enhanced my business's credit profile, and
  
  
• the account was aged which, again, contributes to my business's credit rating. It was my first business credit card.
  

So now I'm left with 3 business credit cards: two from Bank of America and one from Advanta. The Advanta card is about to be anointed as my "goto" card, because I'm still enjoying 0% intro APR on purchases, and the purchase APR will jump to a somewhat reasonable 7.99% when the interest-free period ends . I have been reading some horror stories about this particular Advanta business card (unwarranted rate hikes), but so far I've all is well. If Advanta tries to pull some funny business by raising my rate, I'll just pay the card off (my credit limit is under $3,000, and my balance isn't anywhere near that.)

As a final note: it's really no wonder that American Express is consistently rated as the best credit card bank. Right now the company is offering some high-risk cardholders a $300 payment (in the form of a prepaid gift card) in exchange for these accountholders paying their balance down to zero within a certain timeframe, and closing their account. Now that's my kinda' credit card bank!

NB: In that same JD Power & Associates Credit Card Satisfaction Study(1), Discover Card placed second.

Chase, on the other hand, has identified certain credit card accounts that may be at risk for default, and has responded by imposing a $10 per month fee. Yikes! I'm not a public relations professional, but I do have some sage advice for JP Morgan Chase CEO Jamie Dimon: stop doing that!

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I Paid A Fee, Willingly, for Transferring A Credit-Card Balance

Balance Transfer Fee

For obvious reasons, the most popular credit cards recommended at this site are those which offer a 0% intro APR on balance transfers for at least 6 months and don't charge a fee for transferring balances. So you may find it surprising that recently, I willingly paid a fee to transfer a balance, even though I could have easily qualified for a quality credit card that doesn't charge a fee for the privilege.

The reason I willingly paid a fee? Because, in my situation, it was worth it.

My business credit card debt was a bit high for my tastes (~$7,000) and, even though I could have paid the balance down to zero within 2 billing cycles, I wasn't interested in using up a large percentage of my free cash to clear the debt. The best solution, I thought, was to transfer the balance to a new business credit card with an attractive balance transfer offer and the best possible, fixed "goto" rate, then pay down the balance over 4 or 5 billing cycles.

I chose to transfer my business credit card balance to the Chase Premier Cash Rebate card, and I did so via an unsolicited offer I received in the mail! Critical offer details were:

• 0% Intro APR on new purchases, balance transfers and balance transfer checks for 12 months.
• Purchase APR (the "goto" rate) of 9.99% fixed.
• Balance transfer fee: 3% of transaction, with a minimum of $5 and a maximum of $99.

Here's why I chose this card:

• I've been yearning for a business credit card with a low and fixed interest rate (my idea of low is below 10% APR) for many years now. I like business credit cards because they afford me an attractive level of anonymity when I do business and shop online, and because they really do a great job of building the credit rating of my business. I applied for a similar Chase business credit card about 2 years ago, and that application was rejected even though my personal and business credit rating was good. I was disappointed, but not totally surprised by the rejection, because banks are very careful when it comes to business credit cards (unsecured debt) that have a very competitive interest rate.
• Even though I really don't like the idea of responding to unsolicited mail (the idea is anathema to me, almost as bad as responding to a spam email message, in my opinion), I had to make an exception for this card. As soon as I received the latest iteration of this particular offer (I get unsolicited business credit card offer from Chase about once per month!) I scoured the Internet to see if I could find the same deal online. I failed. The lowest goto APR for a Chase business card I could find online was 11%, and that was variable. I already have a business credit card from both Citi and Bank of America. I used to have a Capital One Business credit card, but I canceled it long ago because the credit line was wimpy ($500) and they wouldn't increase it. The Advanta Platinum Business Card with Rewards Options card was very, very tempting, with a 0% intro APR on balance transfers for 16 months, and a goto APR of Prime minus 0.26%, but the goto APR is variable, and there's no 0% intro APR for new purchases.
  
  Bottom line: big credit card companies often reserve the very best offers for the solicitations they send out to well-qualified, prescreened consumers.
  
  Actually, what I hate most about those wasteful credit card solicitations is the fact that they are the reason why identity theft is so prevalent these days. Many banks like to cast a very wide net so as to generate as much business as they can, but this tactic ends up making it easy for the crooks to get hold of our sensitive information. You can elect to opt out, of course, but I choose not to, because these offers are often the best deals around. So, yeah: I have a true love/hate relationship with unsolicited credit card offers. Of course, I have a very powerful and efficient shredder, so I can shred all the discarded offers 10 at a time.
  
  I sometimes wonder: if my mailbox was on the street and easy to access, would I be wrestling with a serious identity theft situation right now? It's the stuff of nightmares!
• After years of taking advantage of 0% deals in my never-ending quest to pay as little interest as possible, I now find myself loaded up with more personal credit cards than I need, and I don't want to add another personal card to my collection. Furthermore, canceling one or more of them would likely cause my personal credit score to drop, and I don't want that. I've worked hard to eliminate my personal credit card debt and simultaneously get my credit score to a happy place (my TransUnion score is 813 now) and I don't want to do anything to mess it up (I'm planning on buying some property in the not-too-distant future.)

So, as of right now, and thanks to a recent credit line increase on my Citi® Business card, I have $40,000 of unsecured credit available to me for business spending. Furthermore, I now have a business card with a low, fixed APR that I can use for all my temporary financing needs. So I am quite pleased...for now. Depending on how things go, I may signup for that sexy Advanta card in the future.

If you like 0% offers, then check out those unsolicited snail-mail offers at least once in a while. And make sure you have a good shredder.

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A Balance Transfer First For Me: From One Business Credit Card to Another

A balance transfer first for me: I decided to take advantage of a 0% APR balance transfer offer to transfer my entire CitiBusiness® Platinum Select business credit card balance (about $4,000 ) to a new Bank of America Platinum Visa® business credit card.

After receiving the solicitation in the mail yesterday, I applied for the Bank of America card online, and I was approved for a $15,000 credit line--plenty of breathing room, so I don't have to worry about looking "maxed out" after transferring my Citibank balance.

What a great country: in a matters of seconds, I've eliminated interest charges on my entire business-related debt until December, 2006. Me likey'! And if all goes well, I may be able to pay off the entire transferred balance by December. Wish me luck!

Don't get the wrong idea here: I'm not transferring my CitiBusiness credit card balance because of problems with the card--no, I'm only doing it to save on interest charges, plain and simple. If you are in the market for a new business credit card, you should check out the CitiBusiness® Platinum Select credit card. I've had mine for years, and I've been very happy with it. And right now, you can get 0% APR on balance transfers for 12 months with the CitiBusiness® Platinum Select® card (of course, I'm not eligible to take advantage of this great offer since I already have a CitiBusiness® Platinum Select card in my wallet.)

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