Credit card alert: Watch out for business card offers

Business credit cards don't come with the same protections as personal credit cards. Unless you own a business, you don't need a business credit card.

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    Steve Wheelock holds up his credit cards in San Francisco, June 22, 2011. If you're thinking of accepting a credit-card offer, make sure it's for a personal card, not a business card. Business credit cards don't have the consumer protections that personal cards do.
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Inundated with credit offers? Well, who isn’t? From April through June, credit card companies sent consumers some 640 million offers – an 83 percent increase over the same period last year.

If you’re thinking of accepting one of those offers, make sure that it’s for a personal credit card. If you apply for a business credit card, you could run up charges you never expected.

Consumers gained several protections when Congress passed credit card reforms in 2009, known widely as the CARD Act. Congress, however, left in a loophole: The new regulations don’t apply to business credit cards.

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That means that protections that now apply to personal credit cards – such as no more two-cycle billing, or unilateral interest-rate increases – probably won’t be included in a business card you apply for. While most lenders will request a business identification number on their business credit card applications, many don’t. That leaves the door wide open for nonbusiness owners to procure this type of card.

With business credit cards, fees are basically unrestricted and issuers can change the terms of the contract, at their own discretion. According to the Pew Charitable Trusts, an independent nonprofit with offices in Philadelphia and Washington D.C., 80 percent of business credit cards include an “any time” change in terms clause. Another 84 percent allow payments to be used to pay off lower APR balances first.

There are good reasons why business owners might carry a business card. It typically carries a higher credit limit than personal cards do and makes it easier to track tax-deductible expenses.

Keep in mind, though, that when applying for a business credit card, it is not uncommon for banks to request that the business owner guarantee the card with his or her personal credit. Should your business fail, you would still be responsible for the outstanding debt.

While it is possible to procure a business credit card without committing to personal guarantees, it is not an easy task. A few banks will extend this kind of credit card, but first will take a hard look at the longevity of your business, your own credit history and the business’s financial resources.

When it comes to credit-card spending, the old adage probably holds true: Don’t mix business with pleasure.

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