Bank of America Tops Small-Business Study

ARLINGTON, Va. (TheStreet) -- Bank of America (BAC) is the most small-business-friendly credit card company in the U.S., according to a recent CardHub.com Small Business Credit Card Study. Card Hub reached this conclusion after gathering information from the nation's 10 largest banks and evaluating each on the extent to which it has extended Credit CARD Act of 2009 protections to its business credit card offerings, as well as on its transparency about such policies. The study also ranked Wells Fargo (WFC), HSBC (HBC) and U.S. Bank (USB) as the worst-performing issuers in both of these categories. Still, what exactly do these findings mean? How should they influence consumer decisions?

It's important to first understand that credit card branding creates a misperception about so-called business credit cards. These spending vehicles are more consumer oriented than they are tied to individual corporations, as individual consumers are personally liable for debt incurred with them and usage information is relayed to individual consumers' personal credit reports.

Bank of America
Bank of America treats its business credit cards the same as consumer-oriented credit cards under CARD Act protections.

Regulators don't act as if it's the case, but so-called business credit cards should be given the same CARD Act protections as any other consumer-oriented credit card.

The banks who realize this and apply CARD Act protections before regulators inevitably require the change are therefore the most forward-thinking, consumer-friendly business credit card issuers, while those who simply abide by the current enforcement of the law and refuse to be transparent about their policies would seem to be less-sophisticated issuers that small-business owners should avoid.

Card Hub ranked these issuers according to their efforts in giving business credit cards the five most important CARD Act protections:
  • Interest rates on existing balances cannot change unless the account holder is at least 60 days delinquent.
  • No double-cycle billing.
  • Universal default is prohibited.
  • Interest rates on existing balances cannot change unless the accountholder is at least 60 days delinquent.
  • Notice of 45 is required before changing the terms of a card agreement.
  • Favorable payment allocation.

Wells Fargo, HSBC and U.S. Bank lag behind all other issuers in applying such protections. While these banks abide by the current interpretation of the law, they are doing the minimum. To add insult to injury, they refuse to be clear and up front about their exact policies as they relate to business credit cards.

It therefore seems that they care more about hanging onto a dying system for as long as possible than they do about serving the needs of their customers and leading their industry into an era of full transparency. Unless these three issuers in particular wake up to the realities of the new credit card landscape, they risk alienating their prospective customers and seeing their business credit card divisions experience a declining market share.

On the opposite end of the spectrum is Bank of America, which is far and away the best business credit card issuer. It was the only issuer out of the 10 largest banks in the U.S. to protect its indebted business credit card accounts from arbitrary interest rate increases. In fact, it was the only issuer to apply all five key CARD Act protections to its business-branded credit cards.

Small-business owners have two practical options. They can either use a Bank of America business credit card for their business spending or use a personal credit card for purchases that will result in a revolving monthly balance and a business credit card of their choice for all other transactions. Any other payment strategy would be irresponsible -- tantamount to gambling with company debt.

Ultimately, Card Hub's study has two main implications. First, a clear hierarchy exists within the business credit card market. Each issuer's efforts provide insight into organizational strategy and clearly establish the bank to which consumers will likely gravitate. Second, major changes are necessary from certain issuers, namely Wells Fargo, HSBC and U.S. Bank. These changes are inevitable. Whether they are made proactively or as a result of federal regulation is the question.

Until either occurs, however, we can expect the business credit card market to become increasingly top-heavy.

>To submit a news tip, email: tips@thestreet.com.

RELATED STORIES:



Follow TheStreet.com on Twitter and become a fan on Facebook.

Odysseas Papadimitriou is founder and CEO of Card Hub, a website with an extensive collection of business credit cards for new businesses as well as the best credit card rates.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

More from Personal Finance

Amazon Prime Day 2018: When Is It and What Should You Know?

Amazon Prime Day 2018: When Is It and What Should You Know?

When Is the FAFSA Deadline and What Are the Application Requirements?

When Is the FAFSA Deadline and What Are the Application Requirements?

This Should Be Your Retirement Savings Plan When the Stock Market Crashes

This Should Be Your Retirement Savings Plan When the Stock Market Crashes

Former General Electric CEO Jack Welch Has 4 Tips to Getting a Promotion

Former General Electric CEO Jack Welch Has 4 Tips to Getting a Promotion

What Is Neymar's Net Worth?

What Is Neymar's Net Worth?