Business Credit Cards Often Have Big Fees, High Interest

They may come with business-oriented perks, but aren’t required to have the same protections consumer cards do. Rates can be higher and terms can change in a blink.

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Consumers have saved billions of dollars on credit card fees, thanks in part to the Credit CARD Act of 2009.

That law created new protections from crazy interest rate hikes and late fees. Unfortunately, business credit cards don’t come with those protections, and some lenders have no qualms about taking advantage of that, Bloomberg Businessweek says.

For instance, First National Bank of Omaha is now offering the NFIB Business Edition MasterCard. The name refers to the National Federation of Independent Business, which gets revenue from the partnership, Businessweek says. Here’s the interesting part: “The National Federation of Independent Business is typically thought of as an influential business advocacy group,” BusinessWeek said.

The card’s terms say the lender can “unilaterally change the rates, fees, costs, and other terms at any time for any reason in addition to APR increases that may occur for failure to comply with the terms of your account,” and that the lender gets to pick the order payments are applied in.

That means the bank can bump the APR to about 30 percent for something like a late payment, and “cardholders with two different APRs can’t pay down the higher-rate balance until they’ve finished paying off whatever they owe at the lower rate, which virtually guarantees a longer period of indebtedness,” Time says. There’s also a 3 percent foreign transaction fee, now less common on consumer credit cards, and a 4 percent balance transfer fee, higher than most consumers see.

Business cards can offer higher credit limits, expense tracking and business-oriented rewards programs, Time says, but it’s the cardholder’s credit score that will suffer if payments can’t be made on time. CardHub CEO Odysseas Papadimitriou told Time the best approach for small businesses is to pick up a business rewards card for everyday purchases and pay it off in full every month, while keeping and using a consumer card that comes with greater protections.

Another option is to go with a business card that has less crazy terms. “Bank of America has extended CARD Act protections to business account holders,” Businessweek says.

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