Wed 14 Oct 2009
The fallout from the new credit card legislation has begun to show its face, and many small businesses received the short end of the stick. In February 2010, new credit card legislation will be implemented, and many credit card companies, have begun raising interest rates in an attempt to recoup future losses.
And it's not just consumers who are being hit with rising interest rates.
Business credit card interest rates are soaring as well, leaving many small business owners, many of which who are already struggling in this difficult economy, with a great deal of frustration and exasperation.
Dramatic Rise in Interest Rates and Fees
Some credit card companies have raised interest rates so much that they have more than doubled for some business owners. For example, a small business owner with a Bank of America business credit card saw his interest jump from less than 10 percent to 27 percent.
Not only are credit card companies raising interest rates on their small business owners, but they are also demanding higher minimum payments, sometimes doubling minimum payments. This has left many small business owners with little to no options and a credit rating on the brink of disaster.
Many banks, including Bank of America, contend that they raise interest rates or minimum payments on customers after periodically reviewing their external credit risk, and that they provide customers with notification of a pending increase. Customers then have the option of "opting out" of this increase. They can then pay off the balance with the lower interest rate (although their account would then be closed).
How You Can Fight Against Interest Rate Hikes
If you are a small business who has been notified of an increase in your card's interest rate and/or minimum payment, there are a number of things you can do:
Call the lender and negotiate a reduction in your interest rate. Many lenders are willing to lower interest rates for a set period of time if you request this.
Consider opting out of your credit card. This will involve closing your credit card account, but it will also afford you the opportunity to pay off your existing balance under your old interest rate.
Consider transferring your balance to a new card, if possible. Beware, however, of balance transfer fees, as these can often outweigh the benefits of transferring to a card with a lower interest rate.
Carefully monitoring the fine print of your credit card statements will help you ensure that you are not victimized by surprising credit card rate hikes.