Updated on May 22, 2009. 

CREDIT-CARD ISSUERS used to put small-business owners on a pedestal. They'd bestow them with lofty lines of credit and low lifetime rates that would make most cardholders salivate. But now they've fallen from card issuers' graces.

Not only are small-business owners with sterling credit scores and payment histories getting hit with rate increases, higher (and more plentiful) fees and slashed credit lines, one credit-card company is backing away from the group entirely. On May 11, Advanta, a credit-card company that issues cards solely to small businesses, announced that it would cease lending to nearly one million small-business customers as of June 10. Despite its move to end future lending, the Spring House, Pa., company is not accelerating payments of existing balances, says Advanta spokeswoman Amy Holderer. "Customers can pay us back based on their account terms," she says.

Such a liberal payback policy is little solace to Advanta customers like David Thomson, president and founder of Thomson Communications, a public relations firm in Middleton, Mass. While Thomson doesn’t carry a balance on his card, he relies on the account to pay for all of his business expenses such as subscriptions, shipping and office supplies. Three of his employees also carry Advanta cards, he says. "This is so frustrating. I've had the card for years, and it's always been great," he says. "Now I'll need to find a business card for both myself and my employees."

Blame the economy. Card issuers say they're trying to reduce their exposure to unnecessary risk (by closing or cutting lines of credit) and bolster their balance sheets (by jacking up rates and fees). As a result, business owners shouldn't expect any sympathy, says Bill Hardekopf, of LowCards.com, a web site that tracks credit card information. "Credit issuers are not philanthropic organizations; they are in the business of making money."

American Express (AXP), the largest card issuer for small businesses, is taking a number of steps aimed at paring down its exposure to small-business customers, while reaping more money from existing accounts. In December, it jacked up standard purchase, default and cash advance interest rates on all small-business owners by 2% to 3%. Then, in January, it discontinued its Business Capital Line program, which offered accounts that business owners could draw from when paying their suppliers. The company says some of these changes are a result of the difficult economic environment and weaker financial conditions among consumers and small businesses.

AmEx is also slapping holders of its Green and Gold Corporate Cards with higher fees. As of April 21, they were required tp pay a higher delinquency fee of $39 (up from $29) on payments overdue by 45 days or more. If those payments are 60, 90 or 120 days overdue, the fee will be the greater of $39, or 2.99% of the amounts unpaid. High-end Corporate Platinum cardholders don't get away scot-free either. In mid-April, AmEx raised their annual membership fee by nearly 32% to $395 from $300; it was the first such increase in 13 years, notes Janet A. Lee, a spokeswoman for AmEx's corporate services division.

Wells Fargo (WFC) is cutting credit lines and closing some business accounts (the company won't disclose the number of accounts that have been closed thus far). Company spokeswoman Katie Ellis says the accounts Wells Fargo chooses to close are typically those that either have a significant amount of available but unused credit, a high-risk credit profile or have not used their account recently.

And, as Walden found, even Advanta, which likes to play up its small-business-friendly attitude, has jumped on the bandwagon by raising rates significantly higher. On business credit card forum at CardRatings.com, a site that tracks and rates credit cards, several Advanta business customers reported seeing their rates increase inexplicably. One cardholder's lifetime 2.99% fixed rate jumped to 9.99% in July of last year. That same cardholder's cash advance rate also soared from 9.99% to an astonishing 27.84%. Advanta spokeswoman Amy Holderer says customers can opt out of a rate increase, but by doing so their future card privileges will be revoked and they must start paying down their balances.

Most creditors blame the current moves on a worsening risk profile among many of their customers. However, Curtis Arnold, founder of CardRatings.com, thinks the move has more to do with the company's bleak financial picture. "Look at their last earnings call," he says.

-Write to Diana Ransom at dransom@smartmoney.com

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