With the credit card bill in place and about to become active in a few months, credit cardholders are holding their breaths and hoping for the best. Credit card companies are saying that the approval of the credit card bill was a bad move. Credit cardholders are saying no. Meanwhile, small businesses just as badly exposed to the extreme practices of the credit card companies as regular cardholders, want in on the action too. They've been left out from the credit card bill and they are feeling the crunch.
Because small businesses are not included in the new regulations that will come to pass with the activation of the credit card bill, they will still be subject to arbitrary interest rate and fee increases, short notices for credit limit and fee changes and everything else that got the whole country outraged with credit companies which resulted in the credit card bill. A few senators are doing what they can to get small businesses included in the upcoming credit regulation changes, but that's going to take a while.
Starting a few years ago, many small businesses began to rely heavily on their business credit cards to keep their companies running and to finance further growth. Business credit cards were used to pay anything from business travel, dinners with prospective clients and inventory purchases. The result, a huge boom for credit card companies who extended credit lines to small businesses. The small business credit card market was so lucrative that one company, Advanta decided to realign their whole portfolio towards it and saw their business grow in leaps and bounds. That was before the economic crisis happened. Now, credit card companies are cutting small business credit. Small businesses are seeing a large jump in their interest rates. Credit limits are also being cut drastically, usually to unmanageable levels.
Before business credit cards became the vogue, small businesses financed themselves in a variety of ways. Some went for bank loans, others took their financing from their personal savings and many relied on friends and family to keep going. Small businesses usually found their finances to be just above adequate for their business. With credit cards, however, small businesses could borrow large sums to finance their businesses. However, now that the credit crunch has come home to roost, small businesses now need to rethink their strategies.
Small businesses will have to rethink their buying habits and reconsider their growth plans. With credit proving to be costly, they may have to go back to more traditional financing options. Credit card use is definitely going to be a pain for most small businesses and many will probably avoid plastic as much as they can.