B2B Payments

Cards, Regulation and Small Business Financing

Thirty percent of SMBs leverage business credit cards to finance their businesses. But the rules and regulations related to interest rates and APRs that protect consumers’ don’t apply to corporate cards. The result is a potentially devastating impact on the ability of SMBs to access much needed working capital.

Some say that small businesses are second class citizens when it comes to credit cards. Why? The protections afforded consumers under the Credit CARD Act of 2009 don’t extend to cards issued to businesses. In particular, regs that prohibit card companies from raising interest rates on existing debit unless a cardholder is at least 60 days delinquent has the potential to greatly impact the 30% of small business owners who use credit cards for financing who never really know how much their debt will cost, leading to issues with cash flow management, projection on growth and successfully allocating capital. In turn, the uncertainties greatly impact the small business economy.

“Credit card debt instability is a huge problem for smaller businesses—particularly younger businesses since they rely more heavily on credit cards,” Molly Day, VP of public affairs for the National Small Business Association, recently told CardHub. “If entrepreneurial people can’t garner the capital to launch a business we’ll see fewer start-ups, which means slower employment growth and less innovation.”

Despite the lack of government regulations, many credit card issues have independently extended the CARD Act protections to their small business customers and CardHub with their annual Small Business Credit Card Study examines which of the largest issuers have adopted the protections. The study also examines how closely the cards are tied to the personal finances of account holders, which is a key consideration because many small business owners are held personally liable for credit cad debt and have card usage tied to their personal credit report.


The Findings

70% of the largest card issuers in the U.S. offer business credit cards. Barclaycard US and USAA do not have business credit cards, and Discover is not currently accepting new applicants.

Now that the CARD Act has been in place for many years and none of the major issuers have extended any significant protections to business card holders in the past year.

Every major credit card issuer continues to hold customers personally liable for business card use and uses person credit data to determine business card eligibility.

Bank of America continues to be the most friendly business card issuer as it has extended all of the major CARD Act protections to the business-branded cards. They are the only issuer to not arbitrarily change the interest rate on existing balances. In addition, Bank of America has extended its advancement by stopping its practice of reporting business card account information to users’ personal credit card reports. They are the only major issuer besides Citibank that have stopped the practice.

Citibank, Discover, U.S. Bank, and Wells Fargo have extended fewer CARD Act protections to their business-branded cards than their competitors and they are the least small business friendly credit card issuers.

The companies that don’t offer a 45 day change of terms notice include: Citibank, Discover, US Bank and Wells Fargo.

Until credit card issuers fully adopt rules and regulations to protect the business card users, businesses may continue to look elsewhere for alternative lending. However, especially when in a pinch, business owners will continue to put their credit scores on the line and their personal reputation to continue to fund their business.

Overall scores and information on the rankings may be found here: http://www.cardhub.com/edu/business-credit-card-study/ .




Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

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