Secured business credit cards can build credit fast

Running a business can be frustrating, especially when you need financing and discover that your credit scores don’t qualify you for many options.

If you’re trying to build or rebuild credit, then you may have heard that a secured credit card can be a good option. As a business owner, you may need something slightly different: a secured credit card for small business owners. Here, we’ll introduce you to what a secured business credit card is, examine when you would want one. Then, we’ll help you to determine which card is best for your needs.

What Is a Secured Business Credit Card?

A secured credit card is one that requires the payment of a refundable deposit before an account can be opened. With most cards, the amount of your deposit becomes equal to the credit line you’re offered. And in most cases, the issuer will require you to link your bank checking or savings account so the deposit can be deducted directly, but a few issuers will allow you to send those funds to them after approval.

But just like a regular credit card, you can use a secured credit card to make purchases and make charges. And as with any other credit card, with a secured card your payment history is reported to the major credit bureaus, so if you make on-time payments and carry very little, if any debt.  After your first year of on-time payments, many secured card users find that they are able to be approved for a standard, unsecured card. 

Unlike standard, unsecured cards, you don’t need good credit to qualify for a secured card. In fact, secured credit cards are designed for people who have bad credit or who have very little credit history. For many small business owners, these cards can be the best business credit cards for bad credit. Business credit cards are different from consumer cards because they are designed for business expenses.

For many companies, credit cards are an essential part of their business activities. They can help you build your credit scores and credit history, and they can help you obtain the assets you need to properly run your business. Unfortunately, having bad credit or no credit may make it difficult to be approved for a credit card. If you don’t qualify for a traditional business credit card, and you’re looking to establish or rebuild your credit, then a secured business card can represent a viable option.

Putting down a deposit for a credit card may not sound ideal, but it can be worth it. A secured business card can be a valuable tool to potentially build and improve your credit. The security deposit will ensure lenders that, despite your lack of good credit, they will have no exposure if you fail to pay for your charges. But if you manage the card properly and pay for your charges, you can receive the security deposit back.

How a Secured Business Credit Card Works

For the most part, a secured business credit card works like any unsecured credit card for consumers, with the exception that it may help build business credit, not just personal credit.

Like any other credit card, you may be able to access balance transfers to pay off other cards or debt, and you may be able to get a cash advance at ATMs. (Be careful: these advances tend to have a higher APR or other fees associated with the privilege). And just like any other credit card, you’ll receive a monthly statement and you’ll have to make regular payments before the due date. The security deposit is only used if you default on your account. 

If you pay your monthly bill on time and keep your balance low, then you can build credit over time. This will help you qualify for an unsecured credit card. Keep in mind, though, that a small credit line means that it’s easy to hurt your credit scores with high “utilization” or “debt usage.” In other words, if the balance reported to the credit reporting agencies is close to your credit limits, then  your credit scores may be negatively impacted. To be safe, try to keep your balances below 20% of your credit limit.

Pros and Cons of a Secured Business Credit Card

Just like with any financing product, there are both positive and negative aspects to consider with a secured business credit card.

How to Choose the Right Secured Credit Card for Your Business

Just as with any other credit card, to find the right secured credit card for your business, you should examine the card’s benefits, fees and rewards, if any. When selecting a secured business card, take a look at both the minimum and maximum security deposits offered. This should be an amount you can afford, but still large enough that you can make needed purchases. 

You should also look at the interest rate and fees offered. Some secured cards have no annual fee, while others have relatively small fees. Finally, if the card offers some rewards such as cash back, that can be a plus.

Best Secured Business Credit Cards

There are not many issuers offering secured business credit cards, so your choices will be more limited than if you were searching for an unsecured business credit card. Still, the best place to start in determining what type of business financing is best for you is to access your free personal and business credit scores to see what you qualify for. Using Nav, you can not only view each credit score for both personal and business, but you can also see which credit cards or business loans for small business you may be eligible for.

Bank of America Business Advantage Unlimited Cash Rewards Mastercard Secured credit card

This secured business credit card from Bank of America requires a minimum deposit of $1000 to open. There is no annual fee, and you can earn unlimited 1.5% cash back on eligible purchases.

Bank of America will automatically review cardholder’s credit history, and customers who pay on time and meet other qualifications may be able to transition to an unsecured card. Bank of America business credit cards generally report to SBFE.

*All information about the Bank of America Business Advantage Unlimited Cash Rewards Mastercard Secured credit card has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

First National Bank Business Edition® Secured Visa® Card

First National Bank offers a business secured card with a credit limit between $2,000 and $100,000, in multiples of $50. Your security deposit must be 110% of the credit limit that you want, however you will earn interest on the deposit. There is an annual fee of $39.

*All information about the First National Bank Business Edition® Secured Visa® Card credit card has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

Union Bank® Business Secured Visa® Credit Card

Union Bank previously offers a secured credit card for small business owners, but it no longer appears to be offered.

*All information about the Union Bank® Business Secured Visa® Credit Card credit card has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

Wells Fargo Business Secured Credit Card

You may see references online to this credit card as it was a popular option. However, as of October 2022 it is not available.

Personal Secured Credit Cards

If you’re having trouble qualifying for a business credit card due to your credit scores, you may want to consider getting a personal secured credit card. A personal secured card may also help you to build your credit history and improve your credit score, as long as you pay on time and manage it responsibly. 

Platinum Secured from Capital One

Capital One offers its Platinum Secured card with no annual fee and an initial credit line of $200. However, your refundable deposit can be $49, $99 or $200, depending on your creditworthiness. It also offers gives automatic credit line reviews, and you could be eligible for a higher credit line within six months. There’s no annual fee for this card, and no transaction fees.

*All information about the Platinum Secured from Capital One credit card has been collected independently by Nav. This card is not currently available through Nav. To see what business credit cards are available, please visit the Nav Credit Card Marketplace.

Alternatives to Secured Business Credit Cards

If your credit is decent and you don’t need  a secured business credit card, you have other business financing options that can help you access financing and/or build business credit.

Nav’s Verdict: Secured Business Cards

As a business owner, it’s important to have access to a credit card as a method of payment and as a means to build both your business and personal credit history. And if you don’t have great credit, then you’ll quickly run out of options if you need short term funding to remain solvent. By choosing the right small business credit card for your needs, you can utilize a convenient method of payment and build the credit you need to ensure the success of your company. 

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