- FAMILY FINANCES
- MAY 19, 2011
Should You Sign Up for a ‘Professional’ Card?
Credit-card issuers are marketing so-called professional cards—formerly reserved for small-business owners or executives—to individuals, a new report says.
Lenders sent out 2.6 billion offers for these cards to ordinary American households between January 2006 and December 2010, according to a study released Wednesday by the Safe Credit Card Project at Pew Charitable Trusts, a Washington-based consumer-advocacy group.
Professional cards aren’t subject to the Credit Card Accountability, Responsibility and Disclosure Act of 2009 that reins in controversial billing practices such as sudden interest-rate hikes and inactivity fees. The law also requires that card issuers apply payments to balances with the highest interest rates first.
None of those protections apply to professional cards. Because of that, the cards represent a “risk to millions of American families,” Nick Bourke, who directs Pew’s Safe Credit Card Project, wrote in a release.
“Many small businesses are run out of homes, and some small-business owners may get offerings in their personal mail,” John Hall, a spokesman for the American Bankers Association, an industry group, wrote in an email. “The solicitations are clearly labeled as business cards, and the application form requires information about the business.”
Some of the nation’s largest card issuers have voluntarily applied Card Act-style protections to professional cards. For example, Bank of America Corp., the nation’s largest bank by assets, ditched penalty interest rates and late fees, and no longer charges cardholders for going over their credit limits.
Still, roughly 80% of the cards flooding mailboxes include an “anytime” provision, according to Pew. That means lenders can change credit-card terms without any notice. Eighty-four percent of the cards reviewed by Pew allow credit-card companies to apply payments to the lowest rate balances first, a practice banned under the Card Act.
Write to Jessica Silver-Greenberg at Jessica.Silver-Greenberg@wsj.com