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Business Credit Cards Seeing Voluntary Protection
Since the beginning of the economic downturn millions of business owners across the country have found themselves without any relief from the many changes that credit card issuers have imposed. Even with the implantation of the CARD Act, business owners were one of the few that were not protected unless they were using consumer cards instead of those that were labeled as business. Now it seems that business credit cardholders are finally seeing protection of sorts, but at the surprise to many experts it is not from the Federal Government. Instead it is being offered by the credit card issuers themselves, and businesses are saying that it is about time.
When it comes to some of the changes that business owners are seeing from issuers there are now quite a few of them as some of the largest business credit card issuers have announced changes. So far we have seen changes from American Express, Chase as well as Bank of America (who was the most recent to make changes). With these changes we are seeing the extension of time between the billing statements’s closing dates and when payments are actually due. In addition to that we have also seen in Bank of America’s case, that there will no longer be fees for going over one’s limit as well as rate increases on existing balances.
As business credit cards have become the lifeline of sorts for millions of owners both large and small, there is no doubt that these changes are more than welcome. While these are just three of the national issuers, there is no doubt that others will be soon to follow. The only question that remains is that since these changes were done voluntarily, how will the issuers make up for revenue that could potentially be lost by making such a move?
Things Continue to Get Worse For Advanta
As it seemed as nothing else could happen to Advanta Bank Corp, it looks as things continue to get worse for the financial institution that was once labeled as the fifth largest issuer of small business credit cards. While in the past it was in the news for several reasons, it is now making headlines again as recent reports indicate that they have been seized by the state of Utah’s banking regulators.
When it comes to the company’s most recent troubles according to many experts there is no surprise that a seizure of the company was soon to follow its other woes. Not many times before (if at all) has this happened where government officials have not intervened. As for the exact reason of why and why now, in Advanta’s case according to a representative for the Utah Department of Financial Institutions, it was "found to be a in an unsafe and unsound condition" mainly because they were making substantial losses to their credit card portfolio by taking significant write-downs.
As Advanta has now been taken over by the state authorities, it has not been determined what will happen to a major class action lawsuit from once cardholders. The lawsuit itself stemmed from a settlement between the bank and FDIC over the “deceptive” business practices that were used to entice small business owners with no to low introductory rates only to have that rate skyrocket only after a substantial amount had been placed on the card for no reason.
Business Credit Cards Still Not Protected
Since the beginning of the downturn in the economy it seems that business owners have been hit just as hard if not harder than consumers. For many they have not only seen their main form of payment disappear (collapse of Advanta), but they also have had a hard time trying to find a replacement. Just like consumers, they have had their interest rates raised and credit limits lowered without any time to prepare for ways to make up lost revenue.
However, when looking at the main difference of what businesses have to look toward moving forward, one would have to know that the recent regulations put on credit card issuers with the implementation of the CARD Act does not protect businesses. Instead businesses are left to the constant changes that plagued consumers throughout 2009 and in the beginning of 2010.
When it comes to the importance of credit cards for businesses, it would be very hard to find many that don’t use credit cards as a vital part of everyday business. While there may be a few, credit cards have become a fundamental part mainly because they are used to fund everyday cost, bridge gaps in cash flow, and in many cases they are used to help pay employees. When drastic changes occur to the terms of these cards it could very well essentially play a major part in whether the company succeeds or fails, especially for many of the smaller businesses. For larger companies, while the change in rates or limits may not effect it as much as small business it still creates a potential problem that can become one that is hard to overcome.
Merchants Must Wait For Fee Regulation
While change has come in the form of regulation for consumers via the Credit CARD Act, when it comes to merchants it is a completely different story as it now looks as they will have to wait much longer in hopes of seeing change. This is because as it stands now the chairman of the House Financial Services Committee, Barney Frank, has stated that he will not seek the regulation of interchange fees in 2010.
When it comes to the increases of fees many retailers are trying to find ways to keep the cost from being pushed on the consumers, especially in a time when many Americans are trying to cut cost. Within the past months we have seen and heard many stories of businesses both large and small incentive using cash instead of plastic. We have also seen some national retailers go as far as stop using some of the newest payment terminals available in efforts to show their objection to the increase of fees.
While retailers are not looking to pass the cost on, experts have predicted that the consumer could still be charged more in the long run if the fees are every regulated. As credit card issuers use these fees to pay for things such as reward programs among other things, a cap or freeze on these charges would once again give issuers another reason to raise fees.
Merchants and Their Growing Credit Card Fees
When it comes to the many changes that have taken place concerning credit cards, consumers are not the only ones getting hit hard. Just like the millions of consumers, merchants have seen dramatic changes as well. The difference, while cardholders are being charged more to use their plastic; retailers and merchants as a whole are being charged more to accept them.
Each time consumers use their credit cards, merchants must pay a portion of the purchases’ total to not only the merchant’s bank and the cardholder’s bank, but they must also pay the network that processes those transactions. While in past these have been a relatively small percent, these percentages have risen each year and now merchants are paying more then they think is justified. When it comes to numbers, merchants are seeing up to 2.95% of their totals being taken by fees while MasterCard takes up to 3.25%. Both of which are much higher than the percentages from a couple of years back.
In the long run while consumer do have it bad when it comes to new fees by credit card issuers, merchants are having an even tougher time deciding on whether it is really worth it to pass any fees over to the cardholder. On one side, they could continue to lose a little bit of revenue by not charging consumers more, but on the other they could lose the consumer altogether by raising the prices on goods that many people already perceive as high.
Chase Wants to Hear From Business Credit Cardholders
In today’s economic environment one thing that everyone would love is to have a voice when it comes to their banking institution. While many banks have yet to hear the consumer’s cries it seems that one is willing to try. That bank is Chase and they have created a project called "The Chase Business Advisory Board" geared specifically for their current business credit cardholders. According to their site, those that join the group will have the ability to share opinions and experiences with products and services, help design and improve policies, and much more.
Besides letting your voice be heard, it looks as those that join also get to receive rewards by simply letting their voices be heard. One of those rewards seems to be an entry into a sweepstakes where 10 registrants will receive $100. In addition, you will also have the opportunity to receive other cash and prizes for each survey taken.
So will your voice truly make a difference? Well that remains to be seen. Traditionally when companies decide to get consumers’ opinions on this magnitude, there will be a change somewhere down the road. Whether or not it will be taken as beneficial by the consumer is another story. However, with all the changes within the credit card industry and the lack of credit being extended (especially to small business); hopefully Chase will not only hear the people but give them what they need.
Chase Expands Business Credit Card Line Up…..Again
Only days after announcing plans to expand lending in 2010 to provide business owners with more business credit cards, access to working capital, lines of credit and commercial mortgages; it looks like Chase is already starting to follow through for those with business checking accounts. This is in the form of two new cards called the "Ink" and the "Ink Capital" each with "Exclusive Benefits", which were created to thank business owners for utilizing multiple Chase accounts to run their businesses.
While each credit card has no-fee associated with it, each offer is very different on the rewards current checking account owners receive. The Ink which is geared for customers wanting to maximize their rewards gives Chase business checking customers the ability to earn their choice of a 20 percent bonus or 1.2 points for every dollar they spend on the card. There is no limit on the amount of points cardholders can earn, and the points never expire. Those points can then be redeemed through Chase’s "Ultimate Rewards" program. For the Ink Capital card, account holders earn a refund of their twelfth month’s interest every year they have their monthly payment automatically deducted from their Chase checking account.
As a whole the Ink line of cards were said to be created to deal with the primary needs of business owners including the ability to get capital and develop better cash flow. According to Chase, these two new business cards offer owners the ability to do just that while getting the best rewards possible in a very difficult economic environment.
Advanta Back in the News With Bankruptcy
The last time Advanta was in the news, it was at the beginning of the year and at that time their small business credit cardholders were receiving letters that they could not longer make any new purchases. This time around it seems that the news has not gotten any better as Advanta Corp filed to reorganize under Chapter 11 bankruptcy protection.
Like so many other companies, the reason behind this bankruptcy is because they feel they would not meet the obligations of paying their debt, even after listing $363 million in assets and $331 million in debt. However like many other large corporations who file bankruptcy, there is a twist. The twist in this case is that Advanta Bank Corp, which is the main operation that issued small business credit cards, is not part of the filing; simply because troubled banks are handled by regulators. Instead it is thought this branch of operations could eventually be taken over by the FDIC or sold to another company.
For at least one group of cardholders bankruptcy is not the answer they are looking for, as they are still paying skyrocketed interest rates on their card accounts. Instead they have filed a class action lawsuit, which stems from a settlement between the FDIC and Advanta over deceptive and unfair practices. These practices include habitually enticing business owners with low interest rate credit cards only to drastically raise their rates later with no reason. At the moment it is stated that over 300 thousand business cardholders still owe more than $2 billion.
Chase “Ink” Small Businesses into Game Plan
Anyone will tell you that small businesses have been through many tests and trails since the recession begun more than a year ago. Besides the decrease in sales and profit, many business owners saw their primary way to purchase goods and services lost when they were no longer allowed to make new purchases with their credit cards. In fact, the largest business credit card issuer at the time, which was Advanta, even shut their doors and sold parts of their portfolio to American Express. Now with a new line of business credit cards, Chase hopes to give businesses what they want and need most; credit.
Recently, Chase announced a suite of business cards known as "Ink from Chase" specifically geared toward small businesses. At the moment, the suite consist of four cards, with one being a charge card meaning it must be paid in full each month. The names of the cards are the Ink, Ink Cash, Ink Bold and Ink Plus.
Chase has stated that they engineered the "Ink" line of cards to address the needs that small businesses have displayed from daily operations. These cards hope to not only ease these daily operations, but also give quick access to capital as well as improve cash flow. As with many business credit cards today these cards also give business owners the ability to earn and redeem priceless rewards based on their cardholder’s preferences.
Virtual Credit Cards Offer Businesses Worldwide Security
One thing that any and every business or corporation needs and wants is a secure way to make and control purchases. Without it, a company could quickly find themselves in a position that they don’t want to be or even worse, out of business. That is why CitiGroup has partnered with MasterCard to offer companies a payment solution known as “Citi Virtual Card Accounts”.
I know that some viewers may say that this is nothing new, and many credit card issuers offer the same solutions when it comes to payment options. In many cases you are correct, but Citi has added a feature that sets themselves apart from their competitors. That feature, multicurrency capabilities. Made possible by having a large market in the credit card space, Citi is able to issue accounts in local currency regardless of location.
Many experts believe that virtual cards will be the next big move companies shift toward, and this market is expected to grow tremendously over the next three to five years. We should see more headlines in the future with credit card issuers coming out with products to capitalize on this growth.