Pew: "Business" Credit Cards Dangerous for Individuals

Every month, Americans receive 10 million business credit card offers in the mail. These cards look like regular credit cards, but they’re intended specifically to help small companies and large corporations track their expenses.

And unlike regular consumer cards, business credit cards don’t have the same protections under federal lending laws. That’s dangerous, especially now that credit card companies are increasingly marketing business cards to individuals, according to a new report by the Pew Charitable Trusts.

“Most business cards continue to have practices that regulators call potentially harmful,” says Nick Bourke, leader of Pew’s health group. “Unless policymakers ask, millions of consumers and households are going to be subject to risks from business credit cards every month.”

Personal credit cards are regulated by the Credit Card Accountability Responsibility and Disclosure (CARD) Act and the Truth in Lending Act. Under these federal laws, credit card issuers can’t change the terms of a credit card for the first year, and after that must give 45 days’ notice before changing things like interest rates or existing balance rules. Penalty fees for late payments are limited, and any payment above the monthly minimum must be applied to the credit card account with the highest balance.

[Consumer Guide: How the Credit CARD Act of 2009 Affects You]

None of those restrictions apply to business credit cards. That means credit card companies can increase interest rates and fees basically at will, according to Pew’s report.

“Business cards should have the same protections as consumer credit cards,” says Beverly Blair Harzog, Credit.com’s credit card expert. “When Congress put the CARD Act together, a lot of things got watered down to help it pass. This really needs to be addressed.”

The number of business card solicitations mailed out every month varies substantially, Pew found. At the beginning of 2006, less than 2.5% of all credit card solicitations were for business cards. It peaked in February 2009, when business cards comprised 23.4% of all direct mail solicitations. The percentage has dropped to about 5% since the middle of 2010.

Still, that means millions of consumers and households receive business card offers every month. Even moderate-income consumers are targeted. Every month, households with annual incomes below $25,000 receive almost five million business card solicitations every month, Pew found. At the very least, Bourke says, banks should tell consumers when the credit cards they’re applying for don’t conform to the CARD Act or the Truth in Lending Act.

“The high volume of offers that are going out to US households are placing people at risk,” says Bourke.

Image: The Pew Charitable Trusts