There are plenty of reasons to have a dedicated business credit card for your company. They help you separate personal and business spending, which can be immensely helpful when getting your business expenses organized for tax time, and many of the top cards offer consumer protections, rewards programs, sign-up bonuses, special interest rates and travel benefits.
Yet unsecured business credit cards tend to require good credit, so not everyone can qualify for the best offers. If you haven’t established your credit or your credit is damaged, you may consider a secured business credit card where a cash deposit acts as collateral for the credit line. While secured business cards tend to offer fewer benefits than those that are unsecured, they can help you secure a line of credit and build a positive credit history.
Best secured business credit cards
- Wells Fargo Business Secured Credit Card: Best for rewards
- First National Bank of Omaha Business Edition® Secured® Visa Card: Best for flexible credit limits
- Union Bank® Business Secured Visa® Credit Card: Best for low APR
The Wells Fargo Business Secured Credit Card offers credit limits of between $500 and $25,000, based on the amount you set in the deposit account as collateral. Its main benefits are the rewards. You can earn 1.5 percent cash back, or 1 rewards point per $1 spent, and 1,000 bonus points when your company spending equals $1,000 or more in any monthly billing period. There is no annual fee and no foreign transaction fees, which will be helpful if you plan to travel outside the U.S. You can get employee cards for up to 10 employees.
Be aware, though, that your activity with this card will not show up on your consumer credit reports produced by TransUnion, Equifax and Experian. Instead, you will establish a relationship with the bank, and by using the card responsibly over time you may be able to open an unsecured credit product with them in the future.
First National Bank of Omaha Business Edition® Secured® Visa Card: Best business card for flexible credit limits
This secured business credit card is for applicants with bad credit who need access to an especially large credit line. To get it, you’ll have to open a First National Bank of Omaha savings account with at least $2,000, which will serve as collateral for your charges. If you have more cash to put down, you can request a higher credit limit, up to $100,000. The credit limit you receive will be 110 percent of your security deposit. There is a $39 annual fee for this card.
While there’s no rewards program, this card does have the Visa SavingsEdge program, so you can receive discounts from participating merchants when you use the card for qualifying purchases. The APR on purchases is a variable 20.24 percent. Your credit activity will be reported to the consumer credit reporting agencies.
With the Union Bank® Business Secured Visa® Credit Card, you can receive up to a $25,000 credit limit, based on your security deposit, which starts at $500. Although it does not come with a rewards program, it does have a few perks such as enrollment in Visa SavingsEdge. There is an annual fee of $30.
The primary benefit of this card is the low interest rate, at 13.99 percent variable. If you plan on rolling balances over from month to month, that rate will be instrumental in keeping costs low. Your credit activity will be reported to the consumer credit reporting agencies.
Is a secured business credit card right for you?
As a business owner, a secured business credit card will be attractive if you want the basic benefits of a credit card but cannot qualify for a traditional, unsecured business credit card. While they don’t come with the same level of rewards and cardholder perks, they can give you the opportunity to either build or repair a credit history or form a valuable relationship with the issuer. After that, you may upgrade to a business credit card that does not require a security deposit, and you can reclaim the money held in deposit.
A reason you may not want to pursue a secured business card is that it ties up capital. You may not have much cash to put down, and even if you do, you may want more flexibility in being able to access most or all of it without putting your credit card account in jeopardy of closing.
How to choose a secured business credit card
Before applying for a secured business credit card, review the terms, requirements and benefits. The APR and fees should be reasonable for you. If there is a rewards program, it should be easy to manage and one that you will use for your business.
Want to build your credit with the three major credit reporting agencies? Make sure the issuer reports to them. Because most business cards review consumer credit reports as a contingency for qualification, making sure your credit file is filled with positive data will be essential for ensuring that your options are open in the future.
How to use a secured business credit card
When you are creating or repairing your credit history or forming a relationship with the issuer, it is essential that you treat the secured business credit card carefully. The two most important factors to a credit score and to a credit card issuer are:
- Pay on time, every time
- Keep your revolving debt to less than 30 percent of the credit line
In the event you fall behind and cannot make your payments, contact the credit card issuer immediately. You may be able to work out a plan so that you keep the account in good standing. If you do not pay as agreed, the issuer can claim the amount that’s owed from the cash held in deposit.
Secured business credit card FAQ
The following questions and answers can help you understand more about secured business credit cards.
Are any unsecured business credit cards available to me if my credit isn’t perfect?
There are a few issuers that extend unsecured credit cards to business owners who have bad to fair credit. In general, the credit lines will be low, and the fees high, though.
Can I use a personal credit card for business instead?
There is no law that says you have to use a business card to pay for your company’s expenses. Personal credit cards can be a fine alternative. Some are secured and others are unsecured, and there is a greater variety of each. If you do use a personal card for your business, make sure all of your expenses are separate from your personal costs. After building your credit with the personal card, a greater variety of business card options will be available to you.
When can I get my security deposit back?
If you do get a secured credit card, whether it’s a business or a personal card, the money you put down as collateral will be freed up when you close the account with no balance due. Some credit card issuers will convert a secured account into an unsecured account after you use the card responsibly for a certain time frame, so the security deposit will be returned to you after the transition.
The bottom line
Don’t let having less than ideal credit stop you from pursuing the credit card products that can help you and your company get ahead. A secured business credit card can be a positive way to handle your financial affairs while creating a credit profile that other issuers will find appealing.