Business Credit Cards Getting Riskier
Business credit cards have long been one of the most reliable and most used financial fall back position of many businesses. The flexibility and convenience that business credit cards offer have enticed many a credit card holder which is why, now that credit card companies are slowly making business credit cards much less customer friendly, many business owners are in a quandary as to where they can turn to.
One particularly damaging practice, a recent one from Capital One, is when a credit card company reports the credit card business accounts to the personal credit report of the card owner. When a business owner has his business debts listed right alongside his personal debts, this gives the impression that he is overextending his credit. This is potentially troublesome when the card holder wants to take out a personal loan. Loan companies are wary of allowing loans to people with overextended credit and any loan that they get would most likely carry unfavorable terms.
Steve Schoof, spokesman for Capital One said that reporting a business card holder’s accounts to the commercial and consumer credit bureaus is standard practice in the industry. That has not been the case traditionally, however.
Major credit card companies American Express and JPMorgan Chase said that, while they check the credit report of a consumer when he applies for a business credit card, they only report the accounts to the consumer credit bureaus only if the card holder becomes delinquent in his card payments. Otherwise, they only report the accounts to the commercial credit bureaus such as the Small Business Services of Experian and D&B. For small business owners, this is a very nice gesture from these credit card giants. Such a practice allows business owners to use their business cards without having to worry that they may seem heavily in debt on a personal level.
Capital One is the first major credit card company to start reporting the business credit card accounts of business owners to consumer credit reporting bureaus even though the card owners are still in good standing. Unfortunately for small business owners, although the practice is quite unfair, it is still legal. Credit card companies are allowed to report business credit card usage to consumer credit reports as long as the credit card holder have authorized them to check their personal credit. So says Gene Truono, consumer regulatory compliance banking practice managing director of BDO Consulting. Usually, business card holders give their credit card companies that authorization when they apply for their business credit cards.
