Secured business credit cards are a lot like secured cards for individuals. After putting down a cash deposit on behalf of your business, you'll have access to a line of credit that is generally equal, or fairly close to, the deposit you put down.
In the real world, that means putting down $1,000 cash will help you secure a credit line up to $1,000. If you're wondering why anyone would bother signing up for such a deal, they do so for the same reason individuals sign up for traditional secured cards. Without access to a traditional line of credit, secured business credit cards offer one of the only avenues for businesses to build their credit history and boost their score over time.
Since your initial deposit serves as a backstop if you don't repay the money you borrow, it will be fully refunded provided you don't let your account fall into default. After making enough on-time payments (usually 12 months or longer), you may even be able to build your business credit score up enough to qualify for an unsecured business credit card or business loan.
Secured Business Credit Cards to Consider
Since secured credit cards have a much smaller audience, there are fewer options available compared to other types of cards, and even personal secured credit cards. Here are a few of the business credit cards that might be a good fit for business owners seeking this option:
Wells Fargo® Business Secured Credit Card
For an annual fee of $25, business owners can use their Wells Fargo® Business Secured Credit Card to establish a solid credit history. This card is geared to businesses with no established history, and offers a credit limit up to $25,000 depending on the initial deposit amount.
In addition to purchase protection and zero fraud liability, the Wells Fargo® Business Secured Credit Card offers 1% cash back credited directly to a Wells Fargo® savings account, as well as rewards points business owners can redeem for gift cards, cash back, airline tickets, merchandise, or charitable contributions.
Business Secured Visa® Credit Card from BBVA Compass
The Business Secured Visa® Credit Card from BBVA Compass requires a minimum deposit of $500 and extends a line of credit that is equal to 90% of your initial deposit. This card's annual fee currently sits at $40 (waived the first year), and you can add employee cards to your account at no extra cost. You'll also earn 1 CompassPoint for every dollar you spend on your card, or even more points in the categories you spend the most in. Redeem those points for cash back to lessen the costs of running your business over time. Meanwhile, $0 fraud liability and purchase security and extended protection programs round out this card's offerings.
Secured Business Credit Cards: What to Watch Out For
Since secured business credit cards work similarly to secured credit cards for individuals, there are similar pitfalls to watch out for. For one, secured business credit cards typically charge higher interest rates, and those high rates may prove costly if you carry a balance more often than not.
Secondly, secured business credit cards may come with extra fees for everything from additional cards for employees to fees for late payments or spending more than your credit limit.
The best way to minimize your costs and the potential for trouble is to pay your balance in full every month to avoid paying interest. Meanwhile, paying your payment in full and on time every month and staying within your credit limit at all times are both smart moves. By using your new card in a way that will help you build good credit habits, you'll be in the best shape possible once you're able to qualify for an unsecured business credit card.
If your business doesn't qualify for a traditional credit card, a secured business card might be the way to go. Not only do secured business credit cards offer the only way to build this credit history in some instances, but they might actually be the key to building your business over time.
To find the right secured business card for your needs, you should read the fine print, know all of your card's terms and conditions inside and out, and choose a card that offers ongoing perks and rewards you can truly benefit from.
Disclaimer: This content is not provided or commissioned by the credit card issuer. Opinions expressed here are author's alone, not those of the credit card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer. This content was accurate at the time of this post, but card terms and conditions may change at any time. This site may be compensated through the credit card issuer Affiliate Program.