New Credit Card Rules - Can Your Business Benefit?

New credit rules to better protect and inform credit card users just went into effect last month. And, while these new rules are not designed to protect business credit card holders, many businesses can still benefit.

For one, many proponents believe that card issuers (banks and other financing companies) will merge these new rules over to their business accounts simply out of fear of the increased scrutiny and oversight being placed on credit card practices in general.

One thing that all banks and financial companies want to avoid is additional regulation and if they simply just switch many of their slight-of-hand practices over to business credit card holders, more regulation would surely follow - especially since access to business financing is been hot news of late.

Thus, while the Credit Card Reform Act of 2009 was not designed to cover business credit cards many business owners may still see many of the same benefits from this new Act.

Moreover, even though many businesses have already seen their credit limits cut or canceled during the last 18 months or so business owners might not see additional credit lines reductions during this year while banks and other financial companies wait to see what changes these new rules will ultimately have on their own operations and profitability.

There are countless stories of very successful businesses in this country that have bootstrapped their start ups or taken their business to the next level via personal and business credit cards. Credit cards have always been a financing staple for businesses and may once again become in vogue.

Credit cards are credit instruments allowing business owners to make needed purchases today then delay repayment until such time that it is beneficial to the business. Business credit cards are usually unsecured instruments requiring no collateral on the part of the business. And, credit cards are essentially the easiest form of credit to get - usually without time-in-business or profitability requirements; mandatory items for other traditional business loan or lines of credit products.

One key that we have learned from our recent financial credit crisis is that most businesses that use credit cards should have more than one account. Having more than one business or personal credit card account can protect the business should its current financial partner get itself into trouble and turn on them as a way to get out of it, then businesses can just simply fall back on other accounts as to not hamper or hurt their continued operations. Further, with lower credit limits being handed out, many businesses will need more than one credit card account to meet their ever growing needs.

Moreover, with these new rules most banks and card issuers are developing new tools to help card holders better mange their financial position - making it much easier to manage these accounts and spending habits, better define the costs of usage like interest charges and fees for purchases, transfers costs or fees from other actions as well as provide account alerts to inform customers when payments are due. All things that will save the business owner both time and effort.

Keep in mind that the entire business financing landscape has changed and business credit cards are no exception. But, credit cards (business and personal) still remain a viable way in which to provide business short-term financing.

Now, these new rules will also change the way credit cards are approved. High credit limits might not be given at the beginning of a new relationship like they once were a few years ago. But, as your business moves forward and demonstrates to the card issuers that it can and will continue to pay as agreed, these lower credit limits will rise as the relationship builds.

Further, banks and other card issuers will require high credit scores on the part of the business owners or applicant - somewhere north of 740 FICO. While this may immediately preclude many business owners, for those that have high scores it is a blessing. By reducing the risk in the entire credit card market - not to mention the individual risk of your card issuer - those that do qualify and properly use their business credit will begin to see lower rates and fee charges - bringing back a sense of equilibrium to this industry. As it stands, those that manage their accounts are currently paying for the misdeeds of those who took the money and ran.

The bottom line is that business credit cards have been a staple in American businesses for nearly 50 years. And, if these credit products are used properly, for short-term needs in delaying payments for small periods of time, can provide huge financial relief for businesses still struggling to get above water and grow themselves in the future.

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