The Pew Charitable Trusts released a study showing that millions of individuals and small business owners receive offers for business credit cards each month. While this might sound like a tempting offer for some, you should note that business credit cards are not covered by the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. Consequently, entrepreneurs who use credit cards for business or commercial use could be faced with high fees and sudden interest rate hikes.
If your business is structured in such a way that you’re personally liable for your business debt (such as a sole proprietorship or partnership), you are personally responsible for the card. Therefore, your business credit card usage is reported on your individual credit report, which means your personal credit could be negatively affected.
Here are some things you should watch out for:
Account terms can be changed at any time. The Pew study found that 80% of business credit cards allow issuers to change terms of an account at any time with little or no notice or ability to opt out.
Penalty fees are unrestricted. The study also found that 73% of business cards had a late fee attached to them and 67% of business cards had an over-limit fee.
Payments can be applied to lower-rate balances. Credit card companies can apply your payments to low-rate balances first while interest accrues on your higher-rate balances.