Small Business Credit Card Rates On The Rise

Posted by: John Tozzi on May 11, 2009

Has your credit card company raised your rates, cut your limit, or both? If so, you’re not alone. Nearly two thirds of small business owners reported seeing their rates go up in the last 12 months, and 41% said they had their credit limits reduced, according to a survey out today from the National Small Business Association. The survey queried 288 NSBA members.

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Why the jump in rates when overall interest rates are so low? One theory is that banks are trying to shore up their balance sheets, with lenders like Chase cutting traditional lines of credit to small business owners.

As we’ve noted before, credit cards have replaced business loans for many small companies. Most business owners aren’t using credit cards for convenience and paying off the balance each month. Instead, they’re using credit card debt to fund operations and investments: 60% of business owners surveyed reported carrying a monthly balance, with 37% carrying $10,000 or more. For one in three businesses, credit card debt accounted for at least 25% of the company’s overall debt.

Legislation is in the works to limit some of the most aggressive tactics of credit card companies, but the bill doesn’t cover small business credit cards. Check out this story in the Denver Business Journal for a good run down of the credit card bill debate. And we recently surveyed top small business card issuers about rates. Here’s a look at what they said.

If you’ve got a story about your rates rising or your limit being cut, let us know in comments below or on Twitter.

Reader Comments

Stefanie Hartman

May 11, 2009 06:32 PM

Not too surprising. In this economy they've got to do something to increase profits.

Martin

May 11, 2009 08:32 PM

My Bank of America card was raised from 11% to 28% in April 2008. I was told this was to encourage me to pay down the balance quicker as I was getting "too close" to my credit limit. I was never late and never over my limit. Eight months later I paid it off and they lowered it to 24.24%. Three months later they cut the limit in half and a month later they closed the card. Chase took over another card I had from Washington Mutual. I received a nice letter from Chase welcoming me as a new customer. I looked online at my account and saw that they had raised it to 29.99% and my very first bill required a 10% minimum payment, $90 on a $870 balance, the minimum was $22 the previous month and I had paid $40 without charging anything. I paid off that card immediately and received a letter the next month saying they were closing the account. Not a very nice welcome. The closing of my paid off cards also has hurt my credit rating by raising my credit used to credit available ratio, making it more likely for my other credit cards to be closed.

brain

May 11, 2009 09:17 PM

my plastic is by Citibank, my APR is @ 9%, my rate has not gone up in this financial debacle; however, Citibank has ran 6 credit checks on me this year alone. i think that their trying to tag me for a higher rate

shelley jennings

May 11, 2009 10:13 PM

We are a small business owning 3 gifts shops. We are a mom and pop operation and American Express has cut our credit limits on all 4 of our cards. We closed one when they gave us a $1,000 credit limit (whoopee). We have always been good customers. We are so mad we have stopped accepting American Express cards in our stores from our customers.

shelley jennings

May 11, 2009 10:13 PM

We are a small business owning 3 gifts shops. We are a mom and pop operation and American Express has cut our credit limits on all 4 of our cards. We closed one when they gave us a $1,000 credit limit (whoopee). We have always been good customers. We are so mad we have stopped accepting American Express cards in our stores from our customers.

Jeff

May 12, 2009 02:19 PM

Our small business has decided to close all of our credit cards and pay off the balances as a high priority. We will not be using credit cards in the future to finance our business. Use will be confined to travel expenses and paid off monthly. I urge all small businesses to seek alternative fixed rate funding funding, even if it is from family, and in addition, borrow as little as possible.

Shirley

May 12, 2009 03:21 PM

The interest rate on our credit cards with Elan for our small business has just been increased from 9.9% to 14.9%. Again, no late payments or any black marks against the company and we always pay double the minimum payment. Why isn't the government trying to help us. They keeping saying they are trying to make credit easier for the small businesses, but it seems we just keep going in the opposite direction. It was quite ironic that we have had our cards for 4 years and we didn't have any increase in the rate until it became public that other banks were increasing their rates. Maybe some things are best kept secret.

Eric

May 19, 2009 04:38 PM

I WORK for Bank of America and have a small business on the side and also had my rate raised. I paid it off and closed it. The funny part is that the person that closed it may have heard too many of our stories and was fed up because he told me that the bank has raised rates 3 times this year, are doing it because we can and want to get the most money out of our customers because times are tough but that he didn't agreee with it one bit. I commend him for his "pair" if you know what I mean.

Karen

May 26, 2009 03:15 PM

Today (5/26/09) I got an email from Advanta that they are closing ALL of their small business credit card accounts effective 5/30/09 - just four days notice. They do not offer to help you transfer to another card and say they are not accepting applications for any new cards. Just four days notice!

Lisa

May 27, 2009 12:46 AM

We are a small family business in Las Vegas, NV., and the credit crunch has hit this economy hard. I have never seen it this bad and we have lived here since 1980. Over the last 3 years American Express has issued our company 2 business cards. In the past 3 months they have cut our credit limits to maybe a few hundred dollars over what we owe. The credit limit cuts has taken away thousands in available credit from our company. Then today as you know "Advanta" has done the same. You can't even get a loan from the bank, and your credit rating and your collateral makes no differance unless your loan is for the collateral then maybe you might have a shot. My question is, where is all our billions of tax dollars that we spent to bail out the big banks, because they sure are not lending it? With the interest rate increases you would think they wouldn't need any bail out! Their keeping it in their pockets as they watch the little guy go under and more jobs are lost! Something needs to be done fast.

Joseph Rosmann

May 28, 2009 10:44 AM

Chase raised the interest rate on my business credit card almost 4 percentage points yesterday.

This action came despite our never having made a late payment ever, as well as having always made payments substantially larger than the minimum required, and typically days to weeks ahead of the payment due date.

The amount of notice was one month before the new rate sets in.

This is infuriating.

Our company's overall business risk has not changed.

We have been exemplary payers of our debt, have an excellent credit rating, and have very limited debt compared to our asset and income base.

They hurried out this notice on a cheap folded computer generated notice. They did not even have the decency to use a standard business letter form of communications. The document looked like a piece of junk mail.

So much for Chase being a good judge of credit risk, or being business friendly.

Seems to me this is just their way of making sure they beat the deadline in the new consumer credit card law.

This company will be looking for new financing alternatives immediately.

Veronica Price

June 4, 2009 11:18 AM

The only real answer is to encourage companies to rely less on credit and more on cutting cost from within. OUr non profit is having a workshop on June 16th downtown NYC about the Power of Cost reduction. "How $100 Saved Can Equal $1,000 in Sales"
Tuesday, June 16 th , 2009 9am – 11 am | 253 Broadway 3 rd Fl. The event is free but you must RSVP here http://www.brownpapertickets.com/event/69782

Mandi

December 1, 2009 08:33 PM

We have 2 business. We has Advanta they closed our account after raising out rates from 6.9 to 18. We also have Citi cards. After Advanta closed out account. Citi cards decided to raise our rate from 12.9 to 28.9. Had always paid 4,000.00 per month my balance, always on time. 3 months later they decided they needed to close it. They have hurt our credit. I am taking my time to pay them so it does not hurt anymore if I pay it off I will look even worst. Be careful they are out to get us.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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