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NFIB's Business Credit Card: Read the Fine Print

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By Aditi Mukherji, JD on October 14, 2013 2:30 PM

The National Federation of Independent Business has unveiled a new business credit card -- but is it a good deal?

The NFIB Business Edition MasterCard, offered by the First National Bank of Omaha, promotes itself as a "business rewards card built for NFIB members by an NFIB member."

Though the NFIB-branded card boasts a number of perks -- namely, attractive rewards points and no interest for the first nine business cycles -- the card lacks basic borrower protections offered to personal cardholders under the CARD Act, according to Bloomberg Businessweek.

Does the CARD Act Apply?

In 2009, Congress passed the Credit Card Accountability Responsibility and Disclosure (CARD) Act, which protects consumers from two-cycle billing, unilateral APR increases, and certain fees. The goal of the Act is to protect consumers from predatory lending and unfair business practices.

However, the CARD Act only applies to consumer credit cards, as Congress carved out an exemption for business credit cards. So business credit card users remain at risk for many of the dangers Congress aimed to address with the CARD Act.

Though not legally obligated to do so, several card issuers such as Bank of America have extended CARD Act protections to business account holders. It's "only a matter of time before the rest of the industry does the same," Odysseas Papadimitriou, chief executive of credit-card comparison website CardHub.com, surmised to Businessweek.

But the NFIB-branded First National business card doesn't seem to be headed in that direction.

NFIB-Branded Card Concerns

As Businessweek points out, the NFIB/First National card's terms of service state:

  • "We reserve the right to unilaterally change the rates, fees, costs, and other terms at any time for any reason in addition to APR increases that may occur for failure to comply with the terms of your Account"; and
  • "You agree that payments on your Account may be applied in the order we select. We may allocate payments to balances starting with the lowest Annual Percentage Rate."

The terms also permit a penalty APR of 29.99 percent if a borrower makes late payments. They also reserve the right to make other unilateral increases -- classic no-no's under the CARD Act.

If you as a borrower have two balances at different rates, you'd naturally want to pay off the one with the higher rate first, right? Well, First National reserves the right to apply your payments to the one with the lowest rate first -- a practice considered by many to constitute predatory lending.

Depending on your business' financial situation, this may (or may not) work for you. For guidance on your particular business credit card needs, you may want to speak to an experienced business attorney.

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