Beware The Professional Credit Card Tactics

Tue Aug 31, 2010, 7:50 am | 19 Comments

Recently, I received a couple of solicitations for a “professional card.” I didn’t know what it was so I did some research online and came to know that this type of card is not covered under the Credit Card Accountability and Responsibility and Disclosure Act of 2009, better know as CARD Act. It is also known as small-business or corporate credit card. But I am a retired individual. I don’t own any business. I am an ordinary consumer. So why me?

It turns out that the card issuers are somewhat constricted by the CARD Act. To make more money, they are using tactics that the CARD Act is unable to oversee. The issuers can use the same conditions on consumers that applied before the Act went into effect.

CARD Act…

The CARD Act only applies to the “regular” credit cards and you are somewhat protected. Among a few other things, the law prohibits:

1. issuers from controversial billing practices.
2. hair-trigger interest rate increases.
3. shortened payment cycles.
4. inactivity fees.
5. However, issuers must apply payments in excess of the minimum to balances with the highest interest rate.

These laws do not apply to the so-called professional credit card.

The No-Law credit card…

Experts tell us that the CARD Act has squeezed banks’ profits and their ability to operate freely. By moving cardholders out of protected consumer cards and into the old swamps of professional cards, banks might recoup some of the revenue they have lost. In the first quarter of 2010, issuers mailed out 47 million professional offers, a 256% increase from the same period last year, according to research firm Synovate.

You might say the issuers are using sneaky back doors to get into ordinary consumers’ personal finances and make more profit for themselves. An informed consumer is not their best customer. And they are hoping consumers will not be educated enough of the subject matter so that they keep making money out of the consumers’ ignorance.

Two major issues with professional card…

1. Card issuers are tinkering with the way they credit payments to professional cards. Read item 5 above carefully. However, on some professional cards, payments are applied to low-rate balances first – making it more difficult for cardholders to reduce their more expensive balances. Sneaky, Sneaky, Sneaky.
2. Card issuers are easing their application requirements for professional cards, too. They require much much less information than earlier offers.

In a Nutshell
It’s probably OK to sign up for this kind of card as long as you know and understand what you are getting into. You must be completely aware of and have thoroughly read its fine print.

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