Who/What: The Federal Reserve has released its Report to the Congress on the Use of Credit Cards by Small Businesses and the Credit Card Market for Small Businesses.
Why: The study was mandated by the Credit CARD Act that protects consumers against retroactive rate hikes and unfair billing practices, among other things. That law does not apply to business credit cards. In general, Truth In Lending Act protections do not apply to small business cards (except for protections against unsolicited cards and liability limits for fraudulent use).
What the Fed found: While a large majority of small businesses use credit cards (83%), many fewer carry balances (18%). Small business loss rates are generally 20 – 30% higher than that for personal credit cards, and they often require higher credit lines.
The study also described how many small businesses are getting rejected for small business loans, but the majority (nearly 75%) are still being approved for credit cards. In the end, it looks like what won out was the fear that these loans of less resort may be harder to get.
The study concluded that the benefits of extending CARD Act protections outweigh the risks of a reduction in credit availability. It’s worth noting, though, that Bank of America announced earlier this year that it would voluntarily extend many of the CARD Act protections to its small business credit cards.
GerriDetweiler – Personal finance author and Credit Advisor for Credit.com, Gerri contributes
budgeting, debt recovery and savings information online. She is also the
co-author of Reduce
Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.
Gerri Detweiler Credit.com's Personal Finance Expert, Gerri focuses on financial legislation, budgeting, debt recovery and consumer savings information. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.comTalk Credit Radio. Reach Gerri at creditexperts@credit.com.
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There is lot of chaos and misconception about Obama’s new credit card debt relief program. Let us, however, try to understand what it is, and how it could help us. As promised by our President, Obama has eventually introduced the new credit card debt relief program to get people out of financial mess and reduce their debt considerably. Now this program cannot be considered to be the best debt reduction plan, nor can this is the best refuge for people under debt. However, we can definitely use this program to get our debts reduced up to 50-60% or even 70% in some cases. But how can this be possible? Why would creditors agree to reduce their profit.
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