Small Business Credit Cards: Higher Interest Rates On Business Credit Card Accounts

Online, May 24, 2010 (Newswire.com) - A recent report from USA Today showed that small business credit card interest rates have gone up substantially over the last six months, making it difficult for small business card holders to survive under the current interest rate conditions of business credit card services. On some business credit cards, the apr (annual fee) is just to high and business owners are having trouble servicing their debt.

Unfortunately, a new credit card law aimed only at consumer credit card interests rates, which would limit the interest rate spike that a credit card company could impose on cardholders' debt, does not affect the lending practices to small business credit card accounts.

Given the state of the U.S. economy, small business' are still seen higher risk investments, and to reflect that, credit card companies have increased the interest rates on business credit cards substantially over the last few months. Credit card issuers understand that small business' rely heavily on their credit access to provide the necessary goods for their companies, and given the state of the U.S. economy, that's a risky venture.

Unfortunately, in this economy, many small business' aren't able to pay off the balance of their credit cards each month, which means the higher interest rates on small business credit cards can quickly cause problems for those trying to get there business back on track. Between paying off their credit card debt and paying their bills, small business' around the country are struggling to stay afloat.

While some would argue that the rate hikes have no connection to the recent passage of the CARD Act, many are suggesting that small business credit cards are taking the hit, now that the federal law prohibits the large rate spikes on consumer credit cards. The theory is that banks are shifting the interest rate hikes from consumer accounts to commercial credit accounts.

In fact, some small business credit cards have seen interest rates charge up as high as 25% over the last six months, leaving many to wonder if these higher interest rates are just the result of a risky economy, or if these rate spikes are a direct result of the credit card companies shifting their focus from consumer credit cards to small business credit card holders. The financial stability of many small business service providers, given the difficulty of managing their credit card debt, is now in question.

Only time will tell how the new interest rates will affect the owners of these small companies.

For now, small business' are left to cope with higher interest rates, which may pose a threat to the U.S. economic recovery as more companies are forced to leave balances on their business credit card accounts from month to month while interest apr rates continue to rise.