Will new regulations, which went into effect this Sunday, August 22, 2010 (designed to protect consumers against rate hikes and bank charge) change the way banks conduct business with small businesses?

The new rules do not apply to small businesses… only to personal credit cards, but they might have an effect on the way business owners conduct their business.

“While small business credit cards and consumer credit cards are similar in terms of their function and features, they differ markedly in the manner in which they are used. As the Fed report makes clear, small business cards limits and per card spending tend to be much higher, and small business cards require specialized management and underwriting techniques to help manage the particular risks that small businesses present,” says Kenneth J. Clayton of the American Bankers Association, as an excuse for not extending these regulations to small businesses.

With the new regulations it is tempting to use  your personal credit cards as your business cards, and get the new protection. However, doing so has its own set of problems;

Accounting – Blending business and personal cards can create accounting issues. If you keep all your business purchases on one card, you probably can deduct the interest and the fees for this card. Once you start mingling personal purchases, any accountant will tell you it gets pretty hard to distinguish how much of the balance is due to personal purchases and how much is due to business purchases.

Credit Score – The business debt will show up on the personal credit report and the surge in debt might lower your credit score. The usage of available credit on revolving accounts is one of the factors to calculate your credit score. Increasing this ratio will cause your credit score to drop.

Banks – The bank may notice increased usage on your personal credit card and decide it is not a personal card. Then, they can change the terms making it a business card.

Yet, 86% of small businesses say they use their consumer cards for business purposes, according to the 2009 National Small Business Association survey.

Is there a silver lining? With the new law, the credit card issuers are scrambling to make up for lost revenue. What is a better place than the cards that did not go under the new rules? Small business owners might find that the new business credit is greeted by a much friendlier credit card industry. Offers sent out in the second quarter of 2010 totaled 40.5 million, up from 26 million in the previous three month period, according to a new report from the consumer advice website WalletPop, which goes to show the banks are already starting down that road.

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