Households receiving offers for "business" credit cards would be wise to throw them away, a nonprofit research group is warning consumers.
Business credit cards are marketed to corporations, small-business owners, sole proprietors and individuals who may want to use the cards to keep track of work-related expenses.
The cards generally offer enhanced bookkeeping services to help categorize and monitor transactions.
Trouble is, business cards aren't covered by consumer protections under the credit card reform act, which took effect in 2009 and 2010.
Practices that federal regulators consider unfair and deceptive that are banned by the card act "remain widespread in business credit cards that are regularly offered to American households," according to a report released last month by the Pew Charitable Trusts in Washington, D.C.
For example, nothing prohibits interest rates on business cards from shooting up — even retroactively on existing balances — with no warning.
On consumer cards, issuers generally are prohibited from raising interest rates for the first 12 months the account is open, while rates on existing balances generally can't be raised at all. Any rate increase requires 45 days' notice and consumers generally can opt out by canceling the account and paying off the balance under the old terms.
Pew found that households receive about 10 million offers each month for business cards, the majority with "potentially harmful terms" that aren't allowed on cards labeled for consumer use.
The study noted a few big card issuers, most notably Bank of America, have voluntarily extended some of the card act regulations to their business cards.
Pew said it found no evidence that card issuers were trying to push people toward business cards to get around the rules.
"Still, every month millions of consumers are exposed to offers for less-regulated business card products," the report said.
How do consumers know if they are applying for a business card?
The application will say the card is for business or professional use, said Nick Bourke, director of the Pew Safe Credit Cards Project.
The cards will also often have names such as small business advantage card or professional advantage card, he said.
"It's pretty clear from the applicant's end that the card is for business purposes. The problem is it is abjectly unclear that business cards have very different legal protections than consumer cards," Bourke said.
Pew is urging regulators to extend the provisions of the card act to business cards offered to individuals.
At a minimum, Pew said, business cards should carry prominent disclosures about the risk of higher rates, penalties and fees for cards not covered by the card act.