Are business credit card offers a good idea? Probably not. Beware of those credit card offers that look like small business cards and are anything but. There have been a slew of them in the past few months. I’ve received them myself. They look intriguing – lots of points for purchases but they have hidden fees and are not covered by the Credit Card Accountability and Responsibility and Disclosure Act of 2009 because they are “professional” cards.

The Wall Street Journal Weekend Investor, August 28, 2011, warns that: While the Credit Card Act bars issuers from raising rates on existing balances unless a cardholder is at least 60 days late with a payment, there isn’t any such prohibition on the Ink from Chase card. The card agreement says Chase is free to implement a default rate of 29.99% if a customer is late by just one day on a payment. And holders of Capital One Financial’s Business Platinum Card, meanwhile, can see their low introductory interest rates spike if they are just three days late with payment twice in a 12-month period, far less than the 60-day notice period required under the Card Act.

The are Personally Guaranteed

Even more distressing is the small business owner that applies for one of these credit cards without realizing that they are personally guaranteeing the card. So if the business goes under the owner will still owe on the credit. A close reading of the application indicates that rather than true business credit cards these are an attempt by the big banks to have the best of both worlds — Business card regulations with few restrictions and a personal guarantee to sweeten the pot.

Check out Jay Fleischman’s post where B is for Banking. He discusses the unbanked and how having an account makes your finances tidier.

More Bankruptcy B’s:

 

 

 

 

Confusion in the Clouds

“Where can I bank?” I’ve been repeatedly asked this question and told, “I like having my credit card, auto loan and savings all at the same institution.” I say, “don’t keep your money where you owe money.” The response is something like, “well what about my car loan?” Or, “can’t I just have a credit card linked to my bank account.” No. For your piece of mind, no.

It’s like the facts are covered in clouds, all hazy and buried from view. There is a reason the banks offer incentives for tying together different account types. It is because they want easy access to your money if something goes wrong with the credit card, line of credit or loan you may have with them. Your finances may look rosy today but its best to prevent potential problems in the future. If you look there is a clause in the fine print that allows the bank to take your account funds if you fall behind with payments to them.

The PROBLEM is – if you are on the edge just making your monthly payments and something happens to cause you to fall behind, that helpful institution may just help themselves. In many instances they have a right to offset your debt with your cash. Even if they make a mistake and you eventually get it corrected, you will be without those funds for at least 30 days.

What kind of problems could happen? You could become ill, your spouse could become ill, you could have cut backs or lose your job entirely, to name a few.

The only certain way to protect yourself from this happening is to keep your cash (checking and savings) accounts in a different institution from the bank that has your auto loan, credit card, credit equity line, and any other obligations you’ve incurred. Banks don’t care about you. They aren’t people, they are institutions. For additional bank tips see this article.

[This discussion grew out of the previous blog warning of Wells Fargo and Wachovia’s account freezing practices.]