Secured Business Credit Cards Can Build Credit Fast

Secured Business Credit Cards Can Build Credit Fast

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 perviously 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.

Frequently Asks Questions (FAQs)

Is the Nav Prime Card* a Secured Business Credit Card?

The Nav Prime Card* is a charge card, not a secured credit card. It does not require a personal credit check. It is available exclusively to Nav Prime members. 

Nav Prime Card transactions are reported as a monthly tradeline, turning everyday transactions into opportunities that can build business credit with regular use. 

Nav Prime gives you cash flow insights, detailed credit reports, multiple tradelines, and tools that may improve your financial health so you can access the best financing options for your business when you need it. 

The Nav Prime Card is not available in CA, NV, ND, SD.

How Do I Qualify for a Secured Business Credit Card?

It’s important to understand how to get a business credit card. The credit card application will likely have a personal credit check but most issuers do not require a cardholder to have good credit to qualify. You’ll need to place your deposit with the issuer, and they will typically make that easy to do by allowing you to link your bank account. You will also need to verify your identity and have no pending bankruptcies or delinquent accounts on your credit report. 

How Much Money Will I Need for a Security Deposit?

The amount for the security deposit required will vary from lender to lender. Most credit card offers require at least $300 to $500, which becomes your line of credit. But there are a few issuers with lower requirements. If that’s simply out of reach, you may consider some of the other options to build business credit outlined later in this article.

Typically, your credit limit will be equal to the cash deposit. This allows the credit card issuer to  lower its overall risk by securing funds ahead of time. For example, if you want a card with a $500 credit limit and are approved, you will typically be required to pay a security deposit of $500.

It’s important to note that this is not a prepaid credit card in which purchases will be deducted from a balance. Instead, your deposit will be held separately, and you will be required to make payments without relying on the money you paid up front.

What Happens to My Deposit for a Secured Business Credit Card?

As mentioned above, your deposit is held separately (often in an FDIC-insured bank account), and much like a deposit for say, rental equipment, you will get it back whenever you choose to pay off the balance and close the account. 

When exactly you get your deposit back can also vary from one credit card issuer to another, but in all circumstances, your account will need to be in good standing for a period of time. With that in mind, these are the most common scenarios in which a secured credit card lender will return your deposit.

In one scenario, the deposit can be returned when you decide to close the account. Of course, it’s not as simple as just saying, “I’m done; let’s close this down.” Your account must be in good standing and carry a zero balance at the time of closing. Follow the protocol provided by your business credit card company for closing your account and receiving your deposit back.

The other, perhaps most desired, scenario is one in which you successfully reduce your perceived risk by maintaining a history of on-time payments and manageable balances. In this case, the lender may decide to convert your account from a secured credit card account to an unsecured card and to return your deposit without requiring you to close the account. (Or the issuer may raise your limit without you having to increase your deposit.) 

This may not be automatic, so keep an eye on your credit score, and when it rises ask your lender if you can convert your card to an unsecured business credit card. The lender may check your personal and/or business credit report with one or more of the major credit bureaus, and make a decision based on what it finds.

What Risks Are Associated with Secured Business Credit Cards?

Though the application and approval process may be slightly different, when it comes to fees, APRs, and credit reporting, a secured credit card operates much like a regular credit card.

Secured credit cards often have an annual fee associated with them, and though rates vary drastically from lender to lender, the APR can be quite high. If there’s a low introductory APR, read the fine print to make sure you understand what happens after that introductory rate expires. Missing a payment or not paying in full can quickly land you in a dangerous and expensive place.

Likewise, if you only pay the minimum payment, interest costs can make it difficult to pay off your balance. If your cash flow is tight and you forget to make a payment, you’ll likely be charged a late fee. If things escalate and you are unable to pay your debts, you may default and find your deposit forfeited and your account closed. Of course, this will further damage your credit score, since your late payments will be reported to all credit bureaus. Most small business credit cards require a personal guarantee, which means the issuer may go after you personally to collect.

For that reason, it’s important that you are honest about your ability to repay your debts. If you are really strapped, it would be wise to keep the total balance low and to pay it in full by the due date. Keep an eye on your credit limit and how close you are to hitting it and adjust business spending accordingly.

Do Secured Business Credit Cards Build Business Credit?

It’s not unusual to have a limited credit history or low credit scores. However, you can increase your credit scores quickly with responsible credit card use. Secured business credit cards are a great tool to do just that and to show both lenders and the major credit bureaus that you’re a reliable customer.

Having a secured card requires you to have cash on hand for that deposit. But once you establish a positive payment history, you should be able to qualify for an unsecured credit card. Keep an eye on your personal and business credit reports to ensure that your payments are reflected there.

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.

Personal Credit Cards for Business

While some individuals use a personal credit card for business it is not ideal. However, there’s a much wider variety of secured and unsecured cards offered to consumers. Just remember: charges on your personal credit card won’t be reported to business credit bureaus, nor will they help your business establish good credit history. It is never a good practice to combine business and personal purchases on the same card.

Business Credit Cards for Fair Credit

If your credit is decent—not great—there are unsecured business credit cards you may qualify for. Typically you need a FICO credit score between 580 and 669 to qualify for these. These business credit cards for fair credit are specifically tailored to business owners who are working on building or rebuilding their personal credit histories. You may start out with a lower credit limit that you can increase as you prove a history of paying your bill on time.

Business Credit Cards for Startups

If you’ve recently launched your startup, you probably don’t have credit scores or history. Still, there are business credit cards for startups you likely qualify for. You may even be able to get employee cards if you have staff that needs to make purchases for your startup.

Business Rewards Credit Cards

Many business owners like the perks that come with business rewards credit cards. Eligible purchases will help you earn cash back, airline miles, hotel points, or points in another travel rewards program. You might have a card that offers bonus rewards points for qualifying purchases made in certain categories used by small businesses owners like office supplies and advertising. Keep in mind many of these small business rewards credit cards that offer bonus points may have an annual fee.

Business Loans

If you want another option other than a credit card, consider a small business loan. This can be a good option if you need a large sum of money all at once or cash for a purchase that doesn’t allow credit cards.

Vendor Accounts

One way to get access to the products you need and build your credit is through vendor or supplier credit (a.k.a. “tradelines”). Many vendors (for example, those selling office supplies) offer you credit directly through them. You may have a business charge card (one you can only use with that company) or simply a tradeline account that allows you to make purchases and pay off your balance later.

Here are easy approval tradeline accounts that don’t check personal and/or business credit and don’t require good personal credit.

Credit Builder Loans

With a credit builder loan, you build a savings account and good credit at the same time. You make a monthly payment toward a savings account and when you reach a specific amount saved, you get the full balance of the account to spend as you choose. In the meantime, these payments can be reported to credit reporting agencies, helping you build 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. 

*Nav Technologies, Inc. is a financial technology company and not a bank. Banking services provided by Blue Ridge Bank, N.A., and Thread Bank, Members FDIC. The Nav Visa® Business Debit Card is issued by Blue Ridge Bank, N.A. or Thread Bank, and the Nav Prime Charge Card is issued by Thread Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa cards are accepted. FDIC insurance is available for your funds on deposit, up to $250,000 through Blue Ridge Bank, N.A. or Thread Bank, Members FDIC. See Cardholder Terms for additional details.

This article was originally written on January 6, 2020 and updated on April 25, 2024.

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