1. Business Credit Cards: Avoiding the CARD Act

    I imagine most IYM and Money Musings readers are seeing what I’m seeing: After a drop-off in 2008 and 2009, credit-card applications are hitting my mailbox with a vengeance these days.

    As a rule, such applications have a date with my shredder pretty quickly. I don’t really pay much attention to the type of credit-card application it is (personal or business). As a family who uses cards only for convenience and cash rewards, and with no debt other than our mortgage, we have no real need for more plastic in our wallets and/or purses. (‘Tis better to keep wallets as barren as possible, anyway, just in case of loss or theft.)

    According to the Wall Street Journal, though, our beloved credit-card companies have found at least one loophole in the Credit Card Act of 2009:

    WSJ.com: Beware That New Credit-Card Offer

    Yep — small-business (i.e. “professional”) cards aren’t covered by the Card Act and its restrictions. Therefore, card companies are now flinging these offers hither and yon.

    While the companies outwardly state that they’re not doing this to circumvent the Card Act, and that they’re not sending out more professional-card apps than they did prior to the Act’s passage, you and I both know the likelihood of bankers to not exploit a revenue-enhancing loophole is pretty much nil.

    According to the WSJ:

    Until recently, professional cards largely had been reserved for small-business owners or corporate executives. But since the Card Act was passed in March 2009, companies have been inundating ordinary consumers with applications. In the first quarter of 2010, issuers mailed out 47 million professional offers, a 256% increase from the same period last year, according to research firm Synovate.

    Wow. What a coincidence.

    And here’s a bit of contractual balderdash you’d never expect to see from a TBTF bank: Card issuers have “simplified” the professional-card applications so that just about anybody can be a “small business owner.” Yes. Really and for-true.

    Card issuers are easing their application requirements for professional cards, too. In July, for example, Chase sent out an offer for an Ink From Chase Cash Business Card that required much less information than earlier offers.

    In January, mailings for the card asked prospective cardholders to provide the name of their company, the nature of the business, its address and its federal employer identification number. In the July mailing, cardholders merely had to check a box that said “Yes, I am a business owner” or “Yes, I am a business professional with business expenses.”

    “We are always looking for ways to simplify our application,” says Ms. Rossi, the Chase spokeswoman. “All applicants are required to confirm they are a small-business owner or someone who is authorized to charge expenses to the business.”

    Whatever. I’m surprised the checkbox isn’t negatively geared, with text like “No, I am not a small business owner” or “No, I am not a business professional with business expenses.” That way, by NOT checking the box (which is what most in-a-hurry folks would do), you’d be saying that you were, in fact, a small-biz operator looking for more plasti-cash.

    Which your sneaky TBTF bank would be only too happy to provide.

    Watch Those Applications Closely!

    The moral of the story, of course, is that consumers will have to be just as vigilant about their post-CARD-Act credit applications as they were about their pre-CARD-Act apps. Big surprise, right?

    As the kids would say, D/N/T (Do Never Test) the willingess of a card company to backdoor its way to profits. If you haven’t learned that by now . . ..

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