This article comes from Card Hub’s CEO, Odysseas Papadimitriou. Card Hub is a Web marketplace for the best business credit cards as well as business credit cards for new businesses.
If we were to begin referring to green apples as oranges, would they suddenly be more closely related to oranges than to red apples? No, of course not. However, that’s basically what has happened with so-called business credit cards. Despite individual consumers being held personally liable for “business credit card” use, usage information getting reported to individuals’ credit reports, and these so-called business credit cards being more closely tied overall to consumers than to corporations, they were not afforded the same protections as those extended to all other consumer credit cards under last year’s Credit CARD Act.
Different issuers have reacted differently to this branding-based imbalance. Some, displaying foresight and appreciation for customer needs, have taken it upon themselves to proactively apply the CARD Act’s protections to their business credit cards. Others only seem interested in doing the bare minimum required of them by the law. This creates a clear-cut hierarchy in the “business credit card” market, making it quite obvious who are the best and worst credit card companies for entrepreneurs.
The Worst Credit Card Issuers for Entrepreneurs
Wells Fargo, HSBC and U.S. Bank are without a doubt the worst credit card companies for entrepreneurs, according to a small business credit card study conducted by Card Hub. They receive this unfortunate distinction on the merits of not extending a single significant CARD Act protection to their “small business credit cards” and failing to be transparent about certain key policies of interest to prospective customers.
You, as an entrepreneur, need a credit card company that will work both closely and honestly with you, that will help put business plans into action rather than stand in the way of their realization. One shot is often all an entrepreneur has at turning a good idea into a profitable business, and you don’t want the credit card you choose for this endeavor to be characterized by unpredictable terms and interest rates that fluctuate based on the whims of credit card executives. This is unfortunately what Wells Fargo, HSBC and U.S. Bank provide, and you should avoid them as a result.
The Best Credit Card Issuers for Entrepreneurs
Luckily, there is a bright side to the entrepreneurial credit card market – Bank of America. BofA is the only major credit card company to apply each of the CARD Act’s major provisions to its so-called business credit cards, including required favorable payment allocation and rules against both double-cycle billing and universal default. Most importantly though, unless you become 60 or more days delinquent on your account, your interest rate terms for existing balances will not change. What do you think; is that music to a small business owner’s ears or what?
Not only do these changes make Bank of America products the only “business credit cards” you can confidently revolve debt with and therefore both maintain consistent cash flow and properly allocate funds, but they also reveal something about the company’s organizational philosophy. Bank of America appears to truly understand the value of transparency in the revamped credit card market, especially with its business-branded spending vehicles.
Ultimately, you have two choices in terms of small business credit card strategy. First, you can use a Bank of America “business credit card” as your sole spending vehicle and both revolve debt and make purchases that you will pay for in full with it. Alternatively, you can use a consumer credit card for transactions resulting in a revolving monthly balance and any “business credit card” for everyday purchases. Both strategies offer the debt stability that a small business needs as well as a unique ability to track spending and give employees credit cards with customizable limits. You are effectively ignoring labels and focusing on utility in choosing the right credit card strategy—a good thing considering an apple is an apple, even if it’s called an orange.