With a cash deposit, a secured business credit card can help you build your credit and grow your company.
Growing your business can be difficult without consistent funding for everyday expenses. When your credit score is less than perfect, getting a business credit card can seem impossible. That’s where secured cards come in.
A secured business credit card works just like any other credit card — but to open the card, you must put down a cash security deposit. The amount you deposit will determine your line of available credit. Typically, the more money you put down upfront, the higher the line of credit you’ll get with your card — usually 90% to 100% of the deposit amount.
Best secured business credit cards
If you’re looking for a business secured credit card, consider starting your search with these products. You might find a card that fits your exact needs, whether that’s rewards, a waived first-year annual fee or high maximum credit limit.
Best for freelancers: Secured Mastercard® from Capital One®
The Secured Mastercard® from Capital One® isn’t technically a business credit card, but it can be a good choice if you run a lean operation. Freelancers and sole proprietors may find it to be a useful product.
Expenses may be tight when you’re flying solo. That’s why it’s helpful to have a chance at paying a low security deposit and a credit-limit increase shortly after you receive your card.
Best for high maximum credit limit: Business Edition® Secured® Visa Card
If you need a high credit limit, the Business Edition® Secured® Visa Card could be a good option. It offers a maximum credit limit of $100,000. Your deposit will earn interest, and you’re entitled to rebates through Visa SavingsEdge.
Best for rewards: Wells Fargo Business Secured Credit Card
Until September 31, 2018, you can enroll in the Wells Fargo Business Card Rewards Program. When you do, you’ll earn cash back on all purchases at a solid rate for a secured credit card.
Best for $0 first year annual fee: Secured Visa® Business Credit Card from BBVA
To avoid paying an annual fee right now, consider the Secured Visa® Business Credit Card. Your annual fee will be waived for the first year, and you’ll pay $40 a year after that.
The Secured Visa® Business Credit Card is quite a good rewards card too, offering elevated points in categories of your choice.
What is a secured business credit card?
A secured business credit card requires a cash deposit to open, and it’s aimed at business owners who have average, poor, or no credit. The deposit amount typically becomes the credit limit.
Some cards require you to put down more or less cash than the initial line of credit. Once you’ve made your monthly payments on time, your line of credit can be increased incrementally — usually after 12 months or so.
Eventually, your credit card company could transition you from a secured to an unsecured card, depending on if you raise your credit score, prove you can make on-time payments each month and spend responsibly.
How is a secured credit card different from an unsecured credit card?
With a secured credit card, you’ll need to provide an upfront cash deposit. This isn’t required with an unsecured card. Although you can’t use the cash deposit after you open the card, you can usually get it back after you close your account.
A secured credit card is a great option for a new business owner who can’t qualify for a traditional unsecured card, would like access to a higher line of credit or who needs some time to build their credit score.
Why does a secured card require a deposit?
Secured cards are most commonly used by individuals who don’t have the necessary credit score to open an unsecured card. Because these consumers are seen as more likely to default on their debt, issuing banks use the cash deposit as protection against missed payments. Some providers allow your deposit to earn interest in a holding account.
Why does your business need a credit card?
Using a business credit card has many benefits. It makes it easier to separate your personal and business expenses. It can make accounting and expense tracking simpler and cleaner. You might also reap rewards for spending, such as earning points or cash back.
Some business cards also offer benefits specific to business owners, like Wi-Fi when traveling or extra cash back on office supplies.
Depending on your line of credit, you could make larger purchases upfront to get your business running. Use your credit as a revolving operating loan during business launch or lean times.
How to choose a secured business credit card
There aren’t as many options for secured business credit cards as there are for unsecured business credit cards, but you can still try to narrow down the best card for you by looking at:
- Annual fee. Most secured business credit cards have annual fees between $25 and $45. Check whether a card’s annual fee will be waived the first year if you’re looking to try one out.
- Rewards. You may find a card with rewards, which is immediately a good deal when it comes to secured cards. This may be a secondary benefit, however, as your main goal will probably be to build your business credit. You can also compare a number of high-powered unsecured business cards that offer excellent rewards.
- Minimum security deposit. Typically, you’ll find a $500 minimum security deposit.
- Maximum security deposit. You may want a very high credit limit — in that case, look for a card with a high maximum security deposit.
- Cost of employee cards. Some providers charge for additional employee cards; others don’t. If you’re not sure, contact the provider before applying.
What fees does a secured business card have?
- Security deposit. Consider what you want your credit limit to be and make sure you have that amount available to open the card.
- Annual fee. Some cards will waive this fee for the first year.
- Per-card annual fees. You could pay an annual fee for each additional card.
- Late payment, overlimit and returned payment fees. Any of these fees could trigger a penalty interest rate, so check your card’s rate table.
- Foreign transaction fees. You may be charged a percentage or flat fee for using the card abroad or on foreign websites.
Pros and cons of secured business credit cards
- Multiple users. Many cards allow you to add several authorized users to the card for business expenses and purchases.
- Helps you build credit. Many providers of secured business cards report your payment activity to business credit bureaus like Dun & Bradstreet, Equifax and Experian.
- Rewards. Some secured credit cards offer rewards such as cash back or points on certain purchases.
- Security deposit to access credit. In many cases, the cash deposit needs to be higher than the initial line of credit.
- Per-card annual fees. More users often means more fees.
- Slim pickings. Fewer banks offer secured business cards versus unsecured products.
- High variable interest rates. Secured business cards typically come with higher interest rates than the average APR of around 16%.
How to apply for a secured business credit card
To apply for a secured credit card for your business, do the following:
- Apply online or at your bank. You will most likely need to fill out a personal guarantee for the card, even though it’s a business card. This makes you personally responsible for the card’s balance. Have your Social Security number ready, along with your company’s federal tax ID.
- Bring financial documents. These might include revenue figures, a financial reference and your banking information.
- Submit corporate W-9 info. Sign a substitute for your company’s W-9 or submit your W-9 paperwork.
After you get your secured business card, focus on making your monthly payments on time and in full to prove to the credit card bureaus that you’re a reliable customer.
As you continue to use your card, your provider might periodically review your account to see if you’re eligible for an upgrade to an unsecured credit card. You can also call the company and request a credit account review.
How to build business credit