Business Owners' Credit-Card Conundrum

Newconsumer credit lawsput business owners in a tough spot. Should you use personal cards for your business expenses to take advantage of new consumer-credit protections, or stick with business cards, whicharen't coveredby the new laws?

To recap briefly, consumer protections that took effect in late February require consumer card companies to notify cardholders 45 days before increasing their interest rate, changing their fees or making any other significant changes to card terms. They must give card owners the option to cancel their card before increases take effect.

Rate hikes cannot be applied retroactively to existing balances. There are also new limits on how high fees can be in relation to the card's credit limit, and companies must deliver your bill at least three weeks before payment is due.

Credit-card bills also now must include more information, including a statement about how long it will take you to pay off your balance if you only make their minimum required payment.

Sounds great, huh? Research by The Pew Charitable Trusts showed just the change forbidding rate hikes on existing balances should save consumers$10 billion a year.

But what's a responsible business owner to do? Increasingly, owners have used plastic to finance their ventures. In 1993, only 16 percent of owners wereusing credit cards for business,but by 2008 that rose to 44 percent.

In general, credit experts caution against using personal cards for business. If you fall behind on payments, you'll kill your personal credit rating. That could be a disaster that costs you a fortune in higher interest rates on major purchases such as a home, or might even prevent you from being able to borrow or buy on credit. In addition, not using a business card means your business isn't building up its own credit history, which you'll need if you want a business loan in future or to purchase commercial real estate.

Are the better consumer protections worth the risks and problems of using a personal card for business? Probably not. But if you have a great payment record, it's something to think about, as the savings on a card covered by the new protections can be substantial. The Pew's research showed fully one-quarter of credit card accounts saw a rate hike in a single recent year.

Which type of plastic do you use for your business, and why? Will you change your habits? Leave a comment and let us know your take.