Credit card reform leaves small businesses unprotected

SACRAMENTO, Calif. - Consumers may be cheering the new credit card protections that Congress enacted earlier this year. But if you're a small business, your plastic has likely been a big pain in the wallet.

Just ask Misty Seeley, co-owner of Thurm-A-Matic Inc., a small manufacturing company in Rancho Cordova, Calif. Her business's two gasoline charge cards have been hit by higher fees and quicker turnarounds on payment-due dates.

"Credit card companies are putting the noose on us," said Seeley, who said she's always paid off her monthly balance but has been hit by late fees for the first time because of the changes. "The credit card companies have to make their money somewhere. Now it's coming from small businesses. It's really frustrating."

Seeley, who recently canceled one of her company gas cards "because the terms were so ridiculous," said the late fee has bumped up from $29 to $50; payment are due 14 days after the bill arrives, instead of 25; and the due-date cutoff is 2 p.m. - East Coast time.

That's a big difference from the new Credit CARD Act protections for consumers that went into effect this year, which limit late payments to $25 in most cases, require bills to be sent at least 21 days before they're due and require that payments be accepted until 5 p.m. EDT on the due date. Credit card companies also cannot raise interest rates in the first 12 months on new cards and must give more advance warning before increasing rate on existing cards.

But none of those protections applies to business credit cards.

"Consumer card rates have been largely flat since February 2010, but business card rates are soaring," said Schwark Satyavolu, CEO of Redwood City, Calif.,-based BillShrink.com, which recently analyzed card fees and rates of 2,300 small companies in its data base. "Since small businesses aren't protected, they appear to be an easier target for card rate hikes," he noted.

According to BillShrink's survey, interest-rate increases on small-business cards have gone higher than 30 percent since January 2010. That compares with an average increase of 16 percent for consumer credit cards in its survey.

For many small-business owners, it could be time to shop around for a different card - or at least be familiar with changes to their current cards.

"Since business cards do not fall under the CARD Act protections, business cardholders should remain vigilant against interest rate hikes on existing balances and changes in card terms," Greg McBride, senior financial analyst with Bankrate.com, said in an e-mail.

But, McBride warned, since credit remains tight for many small businesses, they should "secure another approval before canceling their existing cards."

Websites like Bankrate.com, BillShrink.com, LowCards.com and CreditCards.com let individuals and businesses compare rates for the card that best suits their needs, whether it's for low-introductory rates or earning rewards like cash-back or airline miles. As with any credit card, compare annual fees, variable interest rates and how long introductory rates may apply.

And be on the lookout for incentives. Visa, the global payments technology company, for instance, has added more vendors to its "SavingsEdge" program that provides Visa business cardholders with discounts, such as La Quinta Inn hotel stays, Staples office supplies, Alamo car rentals and USA Today subscriptions.

"The biggest message is that rates are on the move, but these cards haven't changed equally," said BillShrink's Satyavolu. "The card you got 18 months ago may no longer be the right one. ... Small businesses should be more active in shopping for the right card, rather than sticking by the card they have."

Seeley, whose business also has a company Visa card, said she's always taken her credit cards for granted. But now, given all the changes, "I'm going to watch them like a hawk."

(c) 2010, The Sacramento Bee (Sacramento, Calif.).

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