Chase says not raising rates on small business cards, but is
What can you make of this bit from a recent article on small business lending:
Attorney Eric Dixon sat down at his 23rd Street office last month to check his accounts online, including that of a credit card issued by J.P. Morgan Chase. He was surprised to see that the minimum payment on an account balance of less than $5,000 had jumped into the triple digits.
“That made me look for the rate,” he says.
Mr. Dixon insists he’s never missed a payment—he uses the card for the occasional marketing purchase and as a cash-flow cushion—so what he saw came as a shock: The rate had jumped from 6% to 9%.
J.P. Morgan says it is not raising rates on its small business cards, but could not offer more details about Mr. Dixon’s story. But the scenario Mr. Dixon describes is increasingly common. Small businesses weren’t covered in the new financial reform bill that enacted consumer protections against practices like hair-trigger rate increases.
What makes this a more serious problem is that credit cards have quietly grown into the central piece of the small business financing system. As bank loans became harder to come by and the paperwork more demanding, business owners put their debt on their cards, sometimes at rates that would make consumers’ eyes pop.
A survey by the Washington, D.C.-based National Small Business Association found that among companies with fewer than 500 employees, 34% carried more than a quarter of the company’s overall debt load on a credit card.
More than 70% of owners with a card used for business expenses reported paying interest of more than 10%.
Mr. Dixon—who works for companies and people caught up in state investigations—has a client in the pet care business who financed her company entirely on credit cards. Debt in the six figures, at rising interest rates, is now crushing the company; she is, he says, considering personal bankruptcy.
Classic. Chase says it isn’t raising rates on small business cards but can offer no explanation. I’ll offer an explanation: Chase is raising rates on small business cards despite what it is saying.
Fees & charges | admin September 20, 2010
