Chase Creditcard

The Return of Small-Business Credit Cards

By ANNAMARIA ANDRIOTIS

Lenders are courting small-business owners like we with flourishing numbers of new credit cards and inexhaustible rewards programs.

And it’s easy to see why. About 42% of small-business owners lift a credit-card balance, according to Jul 2011 information from a National Small Business Association in Washington, D.C.

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But a cards mostly miss consumer protections and thus, they can harm or destroy your credit score.

Indeed, critics contend lenders are branch to small-business cards since they have fewer consumer protections. Small-business credit cards were released from a Credit Card Accountability Responsibility and Disclosure Act of 2009 that outlawed pointless interest-rate hikes and other practices on personal credit cards.

On consumer cards, issuers can’t lift that seductiveness rate on existent balances unless a cardholder is during slightest 60 days late with a payment. But on small-business cards, issuers can change it whenever they’d like, according to Odysseas Papadimitriou, arch executive during CardHub.com, a credit-card comparison website.

If we are profitable dual opposite seductiveness rates—one on purchases and another on a balance—the monthly remuneration that is above a smallest compulsory could be practical to a change with a reduce seductiveness rate first, according to Bill Hardekopf, arch executive during LowCards.com, that marks credit label offers, including those directed privately during small-business owners.

In contrast, personal credit cards contingency request a remuneration to a aloft rate initial to relieve a costs for a borrower.

Bank of America chose to request all a vital supplies of this law to a small-business credit cards and Capital One has to a obtuse extent. But many vital lenders haven’t, according to an Apr 2011 investigate from CardHub.com.

You also have to cruise how small-business credit cards will impact your credit score. Even yet they’re pegged to small-business spending rather than personal spending, in roughly all cases, you, a business owners who signs adult for a business card, are privately liable. (The lenders contend a tiny business is also hold responsible, yet in many cases that boils down to a owner.)

Typically, if a small-business cardholder stops paying, lenders will surprise a credit bureaus. That could lead to a reduce credit measure for you, that would expected make removing a debt or other loan for personal functions harder.

Despite a risks, some experts contend small-business credit cards are among a safer financing options for small-business owners right now.

Signing adult for small-business loans is still risky: Most loans need material that a lender can collect on if a loan is not repaid, such as a borrower’s home equity or his business’s machinery, says Jeanne Hulit, behaving associate director for collateral entrance during a Small Business Administration.

In contrast, credit cards are unsecured debt, that means small-business owners don’t have to put their home or other effects during risk, she says.

One plan competence be to use a reduction of plastic. You can use a small-business credit cards for purchases that will be paid in full any month. That way, we can potentially equivocate a risks while earning some-more rewards.

The normal seductiveness rate on personal credit cards is 12.4%, according to a Federal Reserve. But a normal rate small-business cardholders compensate is 15%, according to a NSBA.

Doris McMillon, owners of McMillon Communications, a Fort Washington, Md., executive-coaching-services provider, says she was profitable her small-business credit label on time and promulgation some-more than smallest compulsory remuneration when her seductiveness rate skyrocketed to 23% from 9% dual years ago.

Since then, Ms. McMillon says she’s been regulating her personal credit cards for a business-related purchases she can’t compensate off in full right away. And she’s been regulating small- business credit cards for purchases she can compensate off in full any month while holding advantage of a rewards.

Rewards on small-business credit cards are comparatively generous.

In October, Capital One introduced 6 new small-business credit cards. American Express and Bank of America launched a sum of 5 credit cards, over a duration of 6 months final year. Each has a possess rewards programs.

Chase recently increasing a rewards it doles out on 3 of a existent small-business cards.

Some credit cards also yield giveaway entrance to budgeting tools. In November, Chase launched an online invoicing and money government apparatus for a small-business cardholders, that it says can assistance them lane billing statements and payments done by their clients.

Card issuers contend they’re fervent to yield small-business owners with purchasing power. And as a economy improves, they design some-more tiny businesses will be created, and they’d like to pointer adult those new entrepreneurs as customers.

Longer term, these small-business credit cards can assistance tiny businesses to settle a credit story with one of a small-business credit bureaus, says John Ulzheimer, boss of consumer preparation during SmartCredit.com, a credit-monitoring site.

That competence make removing authorized for financing easier and cheaper.

Ms. Andriotis is a contributor for SmartMoney.com. Write annamaria.andriotis@dowjones.com.

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