Beware a Big Loophole in Credit Card Protections
If you think all of your credit cards are now completely safe from surprise fees and rate hikes, think again. Evidence is emerging of a major loophole in new credit card protection laws. Since August 23, the plastic in your wallet may have felt a little safer. The CARD Act took effect that day and among other things, it means your interest rate can't go up suddenly without warning. Plus new rates won't apply to past purchases you're still paying off. Big sigh of relief, right? "I think a lot of people believe that all credit cards are protected by the CARD Act provisions, and that's not true," says Bill Hardekopf, CEO of Lowcards.com which tracks credit cards rates and fees. "Business" or "corporate" credit cards are not covered by the CARD Act. "You can have your APR increased almost immediately once you get approved for that card," says Hardekopf. What's more, he says card issuers need to make up the money they're losing because of the new restrictions on consumer credit cards. So, rates and fees on corporate cards are likely to go up. Plus, you don't have to be a business owner or a high-flying executive to get a corporate card. Typically, you just have to apply for it. North Carolina Assistant Attorney General Phil Leighman says there's evidence banks are marketing corporate cards to a wider audience, much more aggressively. "The solicitations for business cards have jumped enormously in the last year," says Leighman. More than 250 percent, in fact, according to a company called Synovate, which tracks direct-mail offers. With that kind of marketing push, Leighman says it's only a matter of time before confused customers start calling the state's consumer protection hotline with complaints about the credit card they thought was protected. In many cases, you have to read the fine print to know that you're actually getting a business credit card. Charlotte resident Richard Jones was lucky on that front. He's the owner and lead writer for WWeb Words. Small businessmen like Jones are a top target for corporate credit cards and he was tempted by the offers pouring into his mailbox. But then he happened to hear about the loophole that exempts corporate cards from the new rules. "Not that I foresee having to use any of the protections on purpose," says Jones. "But I wanted to be protected just in case." He decided to keep using his personal credit card for business expenses. Incidentally, there is one type of corporate card Jones might consider safe: Bank of America is the first of the major issuers to say it will voluntarily apply the new regulations to corporate cards.