Business Owners Need Not Apply

The next phase of new credit card regulations announced by the Federal Reserve yesterday will help consumers save money on late-payment fees, but for the most part, they will not apply to small-business owners.

The rules, which go into effect on August 22, 2010, will cap late fees that issuing credit companies can charge consumers to $25, from an average of $38, but would allow a $35 charge for those who are frequently delinquent. Another benefit is how the fee relates to the amount owed. So, for example, if a consumer is late in making a $20 payment, only a $20 fee will be assessed, rather than the $39 previously allowed.

But, alas, the only way small-business owners get to benefit from these new regulations is if they choose to charge items to their personal credit accounts, a Federal Reserve spokesperson says. That’s because most credit issuers offer special payment plans, rewards systems, and other incentives to small-business cardholders.

Because business credit consumers use their funds differently, they also “qualify for tax breaks, that consumers are not eligible for, rewards and discounts that aim to reduce their operating costs to maximize profits, and offer inventory management tools. Plans also offer commercial underwriting that can provide business-size lines that can grow as the business grows,” says Rosa M. Alfonso, director of Public Affairs and Communications at OPEN from American Express.

To read more about what credit cards may be right for your small business, click here.