BUSINESS OWNERS who've long appreciated their business credit cards' generous rebates and expansive credit limits might be surprised to discover that the consumer protections in the new credit-card law don't apply to them.

Thanks to the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, which President Barack Obama signed into law last Friday, credit-card issuers will soon have to give up practices like hiking rates on past purchases, shifting payment dates or charging over-limit fees.

But this law doesn't apply to credit cards used primarily or exclusively for business purposes, says Molly Brogan, a spokeswoman for the National Small Business Association, a nonprofit business association in Washington, D.C. That's because the Truth in Lending Act, which the CARD legislation amends, focuses on "consumers," or those making personal, family or household -- not business -- purchases.

So while businesses and consumers alike will face the fallout from this legislation -- to compensate for lost revenues, banks will likely introduce annual fees, scale back rewards programs, and more -- business owners are potentially at greater risk for having such changes occur without notice, Brogan says.

But don't give up on your business credit card just yet. As the consumer credit-card marketplace tightens up, creditors may start marketing more aggressively to small businesses, potentially offering them cards with higher credit limits and lower rates than they would offer consumers, says Peter Garuccio, a spokesman for the American Bankers Association in Washington, D.C.

"The average rates on consumer cards will likely tick up in the next nine months before the legislation goes into effect, whereas business card holders won't see nearly such a reaction on business cards," says Curtis Arnold, founder of Cardratings.com, a site that tracks and rates credit cards.

Meanwhile, the Federal Reserve is expected to file a report on how small businesses use credit cards to Congress within the next nine months, Garuccio says. As a result, Congress may draft new legislation that gives small businesses (those with 50 employees or fewer) enhanced credit-card protections similar to the ones in the CARD Act.

Discover Financial Services (DFS), American Express (AXP), Bank of America (BAC) and the private-label card issuer General Electric (GE) all confirmed that small-business card holders will not be covered under the new law. None have made any changes to their business card policies yet, but that may change with new legislation. 

For the time being, however, small-business owners are still better off using business credit cards than personal ones. Here are three reasons why:

They don't affect your score

For businesses that are formed as corporations or limited liability companies (LLCs), business credit cards don't register on an owner's personal credit report, so missing a payment will not affect the owner's credit score, says Dan Meder, vice president of product management for Experian's Business Information Services in Costa Mesa, Calif. Business credit reports compiled by Dun & Bradstreet are free via a "self-inquiry" online here or by calling customer service. For an Experian business credit report, which costs $24.95, click here.

If you have a partnership or sole proprietorship, your business credit card history will not be included in your personal credit report, but your personal credit might affect your business credit, as reported by Experian. But if a sole proprietor or partner defaulted on their business cards or filed bankruptcy, they would be personally liable for the balances, says Michelle Dunn, a small business credit and debt-collections consultant in Groton, N.H.  Business owners who operate as corporations or LLCs are off the hook, unless they've personally guaranteed the accounts.

In fact, not using a business credit card for business expenses may hurt your personal credit, Dunn says. Putting all those business purchases on personal credit cards will make you appear overdrawn -- and lower your credit score.

They make bookkeeping easier

The Internal Revenue Service doesn't require businesses to use business credit cards. But keeping track of business expenses -- which are often tax deductible -- is easier when they're not comingled with personal expenses, says Greg Rosica, a tax partner at Ernst & Young in Tampa, Fla. Rather than punching in numbers from business receipts at the end of the year, business owners who use business credit cards can simply print out a list of their expenses, he says. 

Rewards go to the business

Using a business rewards card allows you -- and any of your employees who are authorized users on the account -- to accrue rewards that you redeem for the business, says Rosica. If all your employees use the same credit-card account, the business may also qualify for volume discounts on purchases, he says. But make sure you monitor and restrict your employees' spending: the business is liable for all charges. To ensure that employees use business cards responsibly, Rosica recommends drafting a company policy that clearly outlines appropriate -- and inappropriate -- uses of the company's business credit card.

Write to Diana Ransom at dransom@smartmoney.com

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