Capital One and Citibank are out to trick you by offering cards intentionally designed to be free of the constraints imposed by the new 2009 Federal Law known as the “Credit Card Accountability and Responsibility and Disclosure Act of 2009”.

The Credit Card Accountability act of 2009 seeks to prohibit issuers from controversial billing practices such as hair-trigger interest rate increases, shortened payment cycles and inactivity fees–but the Credit Card Accountability Act of 2009 does not apply to so-called “professional cards”.

Here are the perils and tricks of accepting a credit card that is exempt from the provisions of the “Credit Card Accountability and Responsibility and Disclosure Act of 2009”:
(1) Card issuers can apply any payments in excess of the minimum to balances with the lowest interest rate; e.g., the credit card company can apply your payments to the 14.0% purchases balance without applying any of the funds to the 24% cash advance balance.

(2) Issuers are not required to provide a minimum of 21 days to pay from the date of the billing statement; e.g., you can receive your bill and then only have six or seven days to pay the bill!

(3) Issuers can raise the rates on your existing balance if they find out that you made a late payment to some other credit card, car payment or home loan; e.g., if your mortgage payment is six or seven days late because you were out of town on vacation, your credit card rate can jump from 14% to 29% without notice.

(4) Issuers can fine you with a big fee if you exceed the credit limit on the card, even if by a small amount.

(5) Issuers can change the credit card agreement terms without giving you any advance notice at all.

Since the Credit Card Accountability Act of 2009 was passed in March of 2009, companies have been inundating ordinary consumers with applications. In the first quarter of 2010, issuers mailed out 47 million professional offers, a 256% increase from the same period last year, according to the research firm Snynovate, reports Jesica Silver-Greenberg in the Wall Street Journal.

Consumer advocates note that card issuers are easing their application requirements for “professional” cards, thus turning a blind eye to those applicants who really do not own a business. A January 2010 Chase application for an “Ink From Chase Cash Business Card” asked that (1) applicants provide the name of their business (2) the nature of the business (3) the business address and to (4) provide a business Federal Tax Identification Number.

In contrast, the July 2010 application sent out by Chase for the same card had been “dumbed down” considerably. The July 2010 version of the application (a mere 6 months later) for the “Ink From Chase Cash Business Card” merely asked the applicant to check a box that said “Yes, I am a business owner” or “Yes, I am a business professional with business expenses.”

Read the full story by Jessica Silver-Greenberg of the Wall Street Journal, dated August 28, 2010.

Ideas for Action: Before considering applying for any credit card, ensure that it is a card which must offer you the full protections of the Credit Card Accountability and Responsibility and Disclosure Act of 2009. Disregard and destroy all applications which do not clearly indicate that the card for which you are applying is covered by the Credit Card Accountability act of 2009.