2015 Small Business Credit Card Study

Small Business Study LogoSmall business owners aren’t people. Well, at least that’s how the current regulatory environment portrays them. Congress pretty much left the small business community out in the cold by not including credit cards branded for business use within the scope of the Credit CARD Act of 2009. That might not seem like too big of a deal at first, but consider all the CARD Act has done for consumers in recent years.

The law’s bans on bait-and-switch pricing, exorbitant fees and shady accounting practices have resulted in not only a more transparent credit card marketplace, but also a two percentage-point reduction in the cost of credit between 2008 and 2012, according to the Consumer Financial Protection Bureau. There has also been a, a $6 decrease in the average late fee, which has saved consumers $1.5 billion as of 2013, and a near elimination of over-limit fees that saved consumers $2.5 billion in 2012 alone.

The most important protection that small business owners are missing out on is the rule that prohibits credit card companies from raising interest rates on existing debt unless a cardholder is at least 60 days delinquent. The fact that issuers are allowed to reprice business credit card debt whenever they want means the 37% of small business owners who use credit cards for financing purposes each year are never assured of how much their debt will cost. Such debt insecurity obviously prevents small business owners from confidently allocating capital and growing their businesses, which could in turn have significant repercussions for the economy.

“Credit card debt instability is a huge problem for smaller businesses—particularly younger businesses since they rely more heavily on credit cards,” Molly Day, VP of public affairs for the National Small Business Association, told CardHub. “If entrepreneurial people can’t garner the capital to launch a business we’ll see fewer start-ups, which means slower employment growth and less innovation.”

The good news is that a number of major credit card issuers have taken it upon themselves to proactively extend certain key CARD Act protections to their suite of small business offers. Understanding which issuers have adopted which protections is beneficial not only to small business owners shopping for a credit card, but also to consumers and investors who are seeking to understand which major banks are most sophisticated and best suited to see the regulatory writing on the wall.

That is why CardHub began conducting its annual Small Business Credit Card Study in 2011. The report examines the extent to which the nation’s 10 largest credit card issuers have adopted CARD Act protections for business-branded cards as well as how closely they tie such cards to the personal finances of account holders. The results from our 2014 study can be found below.


Main Findings

 

  • All major credit card companies hold customers personally liable for business credit card use. Also, every major issuer uses personal credit data to determine business credit card eligibility.
  • Bank of America continues to be the most small business friendly credit card company, as it is the only major bank to have yet extended all of the major CARD Act protections to its business-branded cards.
  • Bank of America and Citi are the only two major issuers that do not report business card activity to customers’ personal credit reports.
  • Discover, U.S. Bank, and Wells Fargo are the least small business friendly credit card companies, having extended the fewest CARD Act protections to their business-branded cards and scoring just 30% in this study.
  • As was the case in 2014, 70% of the largest U.S. card issuers offer general-purpose business credit cards. The exceptions are Discover – which is no longer accepting business credit card applicants – USAA, which does not have a business credit card, and Barclaycard US – which only issues co-branded business cards.


Overall Scores & Information

 
Issuer Scores Over Time

Where 1% was used, the score is actually 0%. We chose this approach so that even the issuers scoring 0% are represented and visible in the above chart.
 

Issuer Cardholder Personally Liable? Usage information relayed to personal credit reports? CARD Act Protections Score Transparency Notable Changes
American Express Yes Yes, when the account is cancelled and seriously delinquent 60% Good None
Bank of America Yes Not currently 100% Good None
Barclaycard US N/A (does not offer a general purpose business credit card) N/A N/A N/A None
Capital One Yes Yes 60% Good None
Chase Yes Yes, when the card holder is more than 60 days delinquent 45% Good None
Citi Yes No, but business credit card payment history may impact ability to obtain approval for a Citi consumer credit card 45% Good Adopted a 45 day change of terms notice
Discover* Yes Yes, when the account is cancelled and seriously delinquent 30% Good None
USAA N/A (does not offer a business credit card) N/A N/A N/A None
U.S. Bank Yes Yes, when the account is in default 30% Good None
Wells Fargo Yes Yes, when the account is in default** 30% Good None

*At this time Discover is not actively promoting its Business Card. While there are existing Business cardmembers, no one can apply for a Business card at this time.
**Wells Fargo Business Credit Card performance information is reported monthly to the Small Business Financial Exchange (SBFE) business credit bureau. We do not report the ongoing monthly performance to the guarantor’s personal credit bureaus. We may report to the personal credit bureaus only in cases of default.


Detailed CARD Act Protections by Issuer

Small Business Chart

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Additional Info

2013’s study contains additional information provided by the issuers to explain their small business card policies as well as minor CARD Act protections they have proactively adopted but were not evaluated in our report.

The only issuer to provide additional information relative to 2013 was last year was U.S. Bank in 2014. It established same-day monthly due dates, implemented a minimum 24-day grace period between when a bill is made available and when payment is due, included a breakdown of different balances and promotional expiration dates on monthly statements, and began providing annual interest and fee summaries to cardholders.


Changes Over Time

Issuer 2011 Policy Changes 2012 Policy Changes 2013 Policy Changes 2014 Policy Changes 2015 Policy Changes
American Express Adopted:
- 45 day change-of-terms notice
Adopted:
- No double cycle billing
- No universal default
- Fair payment allocation
Adopted:
- Fair payment allocation
No Policy Changes No Policy Changes
Bank of America Adopted:
- No arbitrary interest rate changes on existing balances
- No double cycle billing
- No universal default
- 45 day change-of-terms notice
- Fair payment allocation
No Policy Changes No Policy Changes Adopted:
- BofA no longer reports business card usage to customers’ personal credit reports
No Policy Changes
Barclaycard US N/A (does not offer a general purpose business credit card) N/A (does not offer a general purpose business credit card) N/A (does not offer a general purpose business credit card) N/A (does not offer a general purpose business credit card) N/A (does not offer a general purpose business credit card)
Capital One Adopted:
- No double cycle billing
- No universal default
- 45-day change-of-terms notice
- Fair payment allocation
No Policy Changes No Policy Changes No Policy Changes No Policy Changes
Chase No Policy Changes Adopted:
- No double cycle billing
- No universal default
- Began reporting business credit card usage information to customers’ personal credit reports after 60-day delinquency.
Adopted:
- 45-day change-of-terms notice
No Policy Changes No Policy Changes
Citibank Adopted:
- No double cycle billing
- No universal default
Adopted:
- Citi stopped reporting business credit card usage information to personal credit reports for its since-discontinued professional card.
No Policy Changes No Policy Changes Adopted:
- 45-day change-of-terms notice
Discover No Policy Changes Adopted:
- No double cycle billing
- No universal default
No Policy Changes No Policy Changes No Policy Changes
USAA N/A (does not offer a business credit card) N/A (does not offer a business credit card) N/A (does not offer a business credit card) N/A (does not offer a business credit card) N/A (does not offer a business credit card)
U.S. Bank Did not participate in the study Did not participate in the study Adopted:
- No double cycle billing
- No universal default
No Policy Changes No Policy Changes
Wells Fargo Did not participate in the study Adopted:
- No double cycle billing
- No universal default
No Policy Changes No Policy Changes No Policy Changes
Previous Reports 2011 2012 2013 Little change was observed in the 2014 report. As such, details regarding issuers’ 2014 policies can be found in the 2015 report 2015 Main Findings
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DISCUSSION
Aug 7, 2014
Photo of Mark S.
By:
Aug 7, 2014
Barclay's does have business credit cards. They underwrite business cc for US Airways for example.
Sep 9, 2014
Photo of Card H.
Sep 9, 2014
The business card offered by Barclays and US Airways is a co-branded credit card. Barclays offers only co-branded business credit cards which weren't taken into account in the report.
May 15, 2014
Photo of Jeffrey T.
By:
May 15, 2014
The article mentions "Every major issuer uses personal credit data to determine business credit card eligibility." Could you provide some information on non major issuers who offer credit based on the financial strength of the company rather than relying on personal credit info?
May 23, 2014
Photo of Card H.
May 23, 2014
We only track the small business underwriting policies of the nation's largest issuers, but it is likely that the majority of smaller financial institutions operate in the same manner. To be certain, however, we recommend calling the issuer of your card of choice prior to submitting an application.

Our content is intended for general educational purposes and should not be relied upon as the sole basis for managing your finances. Furthermore, the materials on this website do not constitute legal advice and should not be relied upon as such. If you have any legal questions, please consult an attorney. Please let us know if you have any questions or suggestions.