Credit card stacking is the strategy of applying for multiple credit cards in a specific order to access a larger unsecured line of credit than individual business credit cards can offer. Here we’ll explain how it works, the costs and benefits, and when it might be a good option for small business owners.
How Credit Card Stacking Works
If a company advertises that they can get your small business an unsecured line of credit of up to $150,000 with low interest rates, it’s likely they are a credit card stacking company.
Just think about it for a moment: If you were a lender, would you loan a startup that kind of business financing without collateral? We looked into how credit card stacking companies get you an unsecured line of credit for such a large sum.
Here is how it works:
- The stacking company reviews your personal credit scores, income and other relevant qualifications to identify cards for which you are likely to qualify. Your personal credit scores typically need to be at least 680 or above to get qualify for most credit cards, and it’s worth noting that approval is not guaranteed.
- Credit card stackers will provide guidance or assistance as you apply for multiple credit cards; often 5—15 or more.
- They will often target business credit cards over personal credit cards because most business credit cards don’t show up on your personal credit reports as long as you make the payments on time. This can protect your personal credit scores from high utilization (a high balance compared to the credit limit.)
- For financing purposes, they may also focus on cards with the lowest APR including 0% intro APR credit cards for the first six to 18 months.
- Once you are approved and the credit cards are issued, you can use them as the business line of credit. If you need to get cash out of the credit line, they will also teach you how to do that without incurring a cash advance fees.
Benefits of Credit Card Stacking
The stacker’s pitch is that it’s hard for entrepreneurs to find and secure the best credit cards, but they are experts in business and personal credit cards.
By strategically submitting applications, credit card stacking firms may be able to help avoid immediate negative impact to personal credit scores. For example, they may try to help you apply for multiple cards at one time so that the hard inquiries on your credit files don’t impact your credit history until after you approved. Their experience may help you decrease the chances of getting turned down because the process is tailored to your specific needs and qualifications.
Costs of Credit Card Stacking
The above all sounds great, but like all financing options, it comes with some downsides. Stackers charge a fee — often hefty — to help you get approved. We’ve seen that fee hover around 9% to 11% of the approved amount for the credit card stacking companies to apply for credit cards for you. In other words, if you are applying for a $50,000 line, you will likely have to pay $4,500 to the credit card stacking company.
You’re paying for expertise and for a quick fix to your cash flow problem, but it can come at a high price tag. For many business owners, cash flow issues are life and death for their business, so they’re willing to pay that servicing fee knowing there are other accounts receivable coming their way and they just need to ride out the short-term cash crunch.
Also there’s a real risk of running up credit card debt you can’t pay back if your business isn’t successful. Some cards may carry a low introductory rate, but after that expires the APR may be much higher.
All major card issuers require a personal guarantee when you get a personal or business credit card. If your business is not able to pay back your debt, the issuer may come after the personal guarantor for payment.
A big impact of credit card stacking is that it will put a lot of inquiries on your credit reports. Even with good credit, you will likely experience a drop of your credit scores for the next 6—12 months. You may have trouble getting additional credit during that time due to the large number of inquiries.
What Are Credit Card Stacking Companies?
Credit card stacking companies or stacking lenders can assist entrepreneurs with identifying the best credit cards for their business funding needs. For a fee, they will help your startup or existing business submit multiple credit card applications in an effort to get business financing.
When Is Credit Card Stacking a Good Idea?
Business owners that don’t qualify for traditional small business loans, SBA loans, business lines of credit, or working capital loans may benefit from credit stacking. Additionally, small companies or low-revenue businesses that have yet to accumulate assets and are unable to qualify for a traditional small business loan may want to consider this option.
It can be a good way to get money quickly — you can usually get approved and receive your cards within seven to 10 business days.
But if you’re using a credit card stacking company it’s important to find one that is reputable as there are scams and questionable practices in this industry. The Federal Trade Commission cracked down on one of these companies, Seed Capital, in 2021. Don’t be afraid to ask questions and make sure you understand how this financing works, and if you choose to work with a credit stacking company, choose a trusted option.
How Nav Can Help
So is credit card stacking worth it? For business owners who are financially savvy and who know what they’re doing, this process can be very helpful as an alternative to other small business loans. It’s especially popular with startups and for business owners like real estate fix and flippers who may have trouble getting short-term financing.
But if you’re just starting out or have an excellent personal credit score (which will make it easier to apply confidently for any credit cards you like), paying several thousands of dollars in fees may not be a wise use of cash. We suggest doing your homework. Use Nav to help sort and rank business credit cards from major card issuers based on your credit profile to apply with confidence.