Small Businesses Are Being Hammered by Unregulated Increases in Credit-Card Interest Rates, Fees

Since the beginning of the year, small-business owners have seen their credit-card interest rates rise nearly 30%, despite the fact that most are paying off their monthly balances.

Credit cards offered to small-business owners aren’t covered under the federal Credit Card Act, legislation enacted earlier this year that protects consumers from unfair billing practices and interest-rate increases.

As a result, small businesses in particular have been hit with higher fees; greater penalties and a soaring need for ways of better managing their credit cardsd.

BillShrink (, a personalized search engine that compares millions of product options, recently released a study that shows small-business owners experienced anywhere from 20% to 30% increases in their credit-card rates since the new legislation was approved, with an overall average of 16%.

With one-third of issuers jacking up their rates for small business owners, it would be understandable if entrepreneurs were overloaded with plastic debt. However, according to the BillShrink study, only 27% of SMBs carry a balance on their cards, compared with 40% of individuals who don’t pay off their card balance at the end of the month.

The average debt held by American small businesses is $12,100, compared with $7,020 held by individuals.

“Since small businesses aren’t protected, they appear to be an easier target for card rate hikes,” says Schwark Satyavolu, BillShrink’s chief executive officer. “However, our study shows that despite the lack of legislative protection and a poor economy, American small businesses are pulling through to keep their debt in check while maintaining good to excellent credit health.”

With BillShrink, entrepreneurs can use the firm’s “credit-card feature for business,” a guide that shows users the best terms offered by credit-card companies. Owners must first answer questions about their company’s cash flow, credit usage and reward preferences.

Once completed, BillShrink then searches the marketplace for the best available rates, offering complete pricing transparency and displaying the card’s true cost over time.

Since January, BillShrink has analyzed 2,300 small businesses seeking advice on credit cards and found that owners who pay off their card each month tend to have better credit ratings and larger annual revenues than businesses that carry a monthly balance.

According to the study, 60% of businesses that carry a balance on their cards have annual revenues under $149,000. These entrepreneurs stated that “cash back” benefits are the most important card-reward feature for their business, followed by airfare rewards.

In order to provide individualized recommendations, BillShrink tracks more than 10 million cellphone-plan combinations, 300 bank rates, 240 credit cards and 150,000 gas stations. The company continuously monitors the marketplace, alerting users when a better deal comes along.

The Redwood City, Calif., company was founded in 2007 by Schwark Satyavolu and Samir Kothari. For more information,