The Rules for Credit Cards Changed - Or Did They?

In May of 2009, Congress passed the the Credit Card Accountability, Responsibility and Disclosure (CARD) Act and President Obama signed the bill into law. Its provisions contain new regulations which are intended to stop some unfair credit card practices by entities issuing the cards.

The drawback for small business owners is pretty clear since the CARD Act applies to consumer credit cards – not business cards. So, if your firm has credit cards in the business’ name, the old rules still apply.

Here are some of the highlights as to what the CARD Act changes:

• Payments must be applied to higher-interest balances first
• Due dates must be the same each month (if the due date falls on a weekend or holiday, the due date becomes the next day in which payments are accepted
• Customers must opt-in for issuers to allow customers to go over their credit limits and be charged over-limit fees
• Credit card issuers must give at least 45 days notice before raising interest rates (cardholders are allowed to opt-out of the increase and then pay down the balance at the old rate but the card is no longer valid).
• Bills must be sent out at least 21 days prior to the due date.
• Payment methods must all use the same fees
• Unless a cardholder is at least 60 days behind in payment, issues can’t raise the rates on previous balances and the old rate must reinstated if the customer makes up the late payments and pays on time for 6 months straight.

While the new rules only affect the consumer-held cards, small business owners will need to be cognizant that the old rules still apply to them.

Many small businesses saw their credit lines shrink during the recession while others saw the downturn as a good time to pay down debt. The employment figures show that many companies took this path and chose to clean up their books instead of reinvesting in their future by hiring more employees.