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Issue link: https://cpapracticeadvisor.epubxp.com/i/200952
FEATURE Why Business Credit Cards Can Turn Company Accounting Into a Nightmare W By Odysseas Papadimitriou ith one-man frms comprising roughly 40 percent of the accounting services industry, according to IBISWorld, and around one-third of all CPAs admiting to a bit of moonlighting in a 2008 Bay Street Group survey, it's clear that a large segment of the industry has more than just its clients' small business needs to deal with. As such, it's important for any independently-operating CPA to understand the inherent advantages and drawbacks of using business-branded credit cards to manage practice expenses. An Unbalanced Regulatory Environment The CARD Act of 2009 essentially ushered the credit card market out of the dark ages. It replaced predatory, bait-and-switch practices with reinforced consumer protections that ensure cardholders will not be charged egregious fees or see the cost of their debt arbitrarily increased. Yet despite having their personal credit reports pulled for underwriting purposes and being held personally liable for account balances, small business credit card users inexplicably aren't covered under the scope of this landmark law. Rather, its provisions – including that which bans issuers from increasing interest rates on existing balances unless a cardholder is at least 60 days delinquent – only applies to general-consumer credit cards. Tis curious legislative distinction can be chalked up to the efectiveness of the banking industry's lobbying eforts, according to Dr. Peter Nigro, Sarkisian Chair in Financial Services at Bryant University. "Politicians wanted to appease the credit card companies and give them another revenue stream that was taken away by new consumer regulations," he told CardHub in a recent interview. "Sad but true." Threatening Debt Stability Regardless of the rationale, the credit card market's regulatory imbalance is 30 November 2013 • www.CPAPracticeAdvisor.com