Small Businesses Could Be At Risk For Credit Card Debt This Year
Due to recent regulations by the Federal Reserve on consumer credit cards, many lenders will be targeting small businesses with new solicitations in the next year.
The Credit Card Accountability, Responsibility and Disclosure Act did not affect credit cards issued to small businesses, as much as one-third of which routinely rely on credit for their financing needs.
"You are going to find a real effort on the part of card issuers to look at this as an opportunity to grow credit cards outstanding at fairly significant interest rates," David Robertson, publisher of the Nilson Report, told The Los Angeles Times.
Interest rates on card offers to businesses grew rapidly last year, with new offers on products such as CapitalOne's No Hassle Cash and Chase's Business Ink cards containing rates as high as 22.99 percent, the news source says.
Further, one delinquency on the Chase card can send these rates up to 30 percent, the Times says. These missed payments could then create more debt problems for owners who are already facing an economic climate full of uncertainties.
Despite the trend towards higher rates, many small businesses have turned away from credit for monetary needs. Last year, credit cards fell from first to third place among the demographic's most-used sources for financing.