Banks Sidestep New Rules, Push ‘Business’ Credit Cards on Consumers

Those wily banks. Always a new trick up their sleeves. The latest: skirting the protections of the CARD Act (which are working, to banks’ dismay) by declaring that millions of individual consumers aren’t just individual consumers, they’re also business owners–even if they’re not.

Why? Because business credit cards aren’t subject to CARD Act regulations, like the cap on late-payment fees and overlimit fees, rules against surprise interest-rate hikes, and a ban on “inactivity” fees. So every month now, banks send out 10 million business credit card offers to people of all income levels and walks of life: retired grandmas, disabled veterans, the kid who makes your 99-cent Chili Cheese Fries Burrito down at Wienerschnitzel. The problem (for consumers, not for banks) is that people who apply for these “small-business” cards are personally liable for all charges–but they’re not covered by CARD Act safeguards against unfair and deceptive practices.

In response to this everybody’s-a-business campaign, the Pew Charitable Trusts are calling for CARD Act rules to be extended to any card that holds an individual personally liable for all charges. Is this really necessary? Perhaps. A Pew survey found that: 80 percent of business cards have an “anytime” change-in-terms clause, which means the issuer can change the terms whenever, with little or no warning; 84 percent of business cards give issuers sole right to apply payments to low-rate balances first, which maximizes charges on higher-rate balances; 76 percent include penalties for late payments or overlimit transactions, with the median overlimit fee a whopping $39–which means if that $5 Wendy’s Baconator you just ordered takes you over your credit limit, it actually cost $44. Enjoy. (And to think…you could have had a Chili Cheese Fries Burrito instead.)

The great American hotdog mystery. Speaking of Wienerschnitzel (which we seem to do often), we’ve been wondering why there are so many national hamburger chains (and pizza chains and Taco Bell, etc.) but only one national hotdog chain–and Wienerschnitzel isn’t even national. Its locations are concentrated almost entirely in California, Texas and the Southwest. Well, here’s your answer, which comes from instructor Anna Friedman Herlihy, who teaches at the School of the Art Institute in Chicago. She says the reason is that Americans in different regions all eat hotdogs differently. “People’s hotdog preferences are extremely regional, tied to how they’re cooked and what they’re topped with (even what kind of bun they’re put in). It’s one of the few such drastic regional distinctions in American food culture left.” Plus a lot of kids choke on hotdogs. One study found that 17 percent of all food-related asphyxiations among children under 10 are caused by hotdogs. (Who knew eating a hotdog could be dangerous?)

There’s something about the HENRYs. Regular correspondent Pam Danziger, who runs a firm called Unity Marketing and bills herself “one of the foremost experts on retail and discretionary spending,” has some advice for high-end retailers: target the HENRYs. What’s a HENRY? People who are High Earning Not Rich Yet. Or households that pull down $100,000 to $250,000 per year. “While the typical ultra-affluent household spends three to four times more than a HENRY, the fact is there are 10 HENRY households for every one ultra-affluent,” Danziger says. Which makes the HENRYs a much more potentially lucrative market segment–they account for 80 percent of all luxury spending. Trouble is, they’re not breakin’ it off the way they used to. So what’s a high-end retailer to do? You could read Danziger’s new book, Putting the Luxe Back in Luxury, in which she reveals secrets of cracking open the luxury market. Or you could hope someone–anyone–can fix our economy. We ourselves qualify as HENRYs (hard to believe, we know) and it’s been years since we indulged in any luxury spending outside of a microbrew and a decent pizza. When you don’t have any “clarity,” as economists say, it’s hard to see your way to dropping a lot of cash on anything you don’t really need.