You might find it challenging to secure a business loan or a business credit card if your credit score is low — but that doesn’t mean you’re out of options.
One workaround is applying for a secured business credit card. Not only will this give you access to working capital, but it will help you improve your credit score along the way. We have 3 cards in mind.
What Is a Secured Credit Card?
A secured credit card is a way for small businesses with a low credit score to get financial backing. You can use it to purchase office equipment and fund other company expenses.
As with other credit cards, there are rewards in place for frequent users. These perks would all depend on the bank you’ve partnered with. It’s crucial to work with a credit-card company that gives rewards that are best suited for your needs.
A secured card also keeps your personal account separate from your business transactions. The only downside to using secured credit cards is that you’re required to put money upfront. Not every business owner can afford that.
How a Secured Business Credit Card Works
A secured credit card works like any other business credit card. The main difference is that you have to make a deposit to qualify. (Note: You can get the deposit back should you ever need it.)
The amount you deposit will dictate what your credit limit would be. If you’re unable to pay, the deposit will serve as collateral.
You can use a secured business credit card to rebuild credit. That is, of course, assuming that you’re able to make payments on time. If you’re a responsible credit-card owner, your credit score will improve.
How to Get a Secured Business Credit Card
You can apply for most secured business credit cards online or by heading to the nearest bank branch near you.
Banks have different requirements. But outside of your personal information, you likely must submit the following:
- Legal business name, address and telephone number
- Date when the business opened
- Social Security number or business tax identification number
- Type of ownership
- Number of business owners
- Gross annual revenue
Only U.S. citizens can apply for secured credit cards.
Who Offers Secured Business Credit Cards?
Many banks offer secured business credit cards. Some banks (such as Wells Fargo) will require that you have an existing account with them to qualify.
Here are 3 of the best secured credit-card business opportunities:
1. Wells Fargo Business Secured Credit Card
The Wells Fargo Business Secured Credit Card is ideal for businesses trying to rebuild or reestablish their business credit. They are great for small business owners who have little to no credit history.
Many features make this credit card stand out:
- For starters, the annual fee is $25 per card. Wells Fargo removes any foreign transaction fees. You can view your spending reports online and get up to 10 employee cards.
- You can get up to 1.5% cashback for every dollar spent that’s credited quarterly.
- Or you can earn 1 point for every dollar spent. And when you get to $1,000 in a monthly billing period, you’ll receive 1,000 bonus points. You can then redeem those points for airline tickets, hotel accommodations, car rentals and cruises.
- Users can borrow anywhere between $500 to $25,000 depending on how much you deposit.
- Interest rates are the prime rate plus 11.90% on purchases and the prime rate plus 20.74% on cash advances. There is a grace period of 25 days on purchases.
- If you’re responsible with your monthly payments, Wells Fargo will send your usage behavior to the Small Business Financial Exchange trade association so you can build up your credit history.
Note: Wells Fargo doesn’t send reports to consumer business bureaus.
You can use Wells Fargo Business Online to manage your account and make transfers. There’s an automatic payment feature that ensures you don’t miss your payment due date. The card itself has a chip technology that protects you against fraudulent transactions. You also can set up an alert every time someone uses the card.
2. BBVA Secured Visa Business Credit Card
The BBVA Secured Visa Business Credit Card has many benefits, but this card is only available to those living in Alabama, Florida, Arizona, Texas, New Mexico, Colorado and California.
- You can borrow as much as 90% of the money you deposited. The more you put in, the larger your credit limit would be.
- There’s no annual fee for the first year ($40 a year afterward).
- As with Wells Fargo’s secured credit card, you can earn 1 point for every dollar you spend. However, BBVA gives you 2 points for purchases made at gas stations and restaurants. You receive 3 points when you make purchases from office-supply stores.
- There is a 17.74% APR for purchases and balance transfers. Cash advances have an APR of 26.74%.
To qualify, you’ll open a Secured Credit Card Savings account with an opening deposit of $500. You can deposit in $100 increments.
You can apply for employee cards, which come at no additional cost. If you want, you can set spending limits for each employee. The bank records all purchases so you can review them after.
There is a penalty fee if you’re unable to pay on time. For a statement with a previous balance that’s less than $100, the fee is $19. If it’s $100 or more, it will be $39. If penalty APR is in effect, the fee will go up to $49.
Because the credit card is a Visa, you’ll enjoy some perks, including:
- Visa Liability Waiver Program — Protects you from losses incurred through the misuse of your card up to $100,000.
- Auto Rental Collision Damage Waiver Program — Covers your collision, damage and loss insurance when you rent a car using the BBVA card.
- Purchase Security and Extended Protection — Insurance for things you buy using the credit card for 90 days against theft, loss or fire
- Travel and Emergency Assistance — Business travelers can call Visa emergency services for concerns such as ticket replacement and medical or legal referrals.
- Travel Accident Insurance — You’re covered up to $500,000 when you run into an accident if you pay for your transport using your credit card.
If you enroll your BBVA Secured Visa Business Credit Card with Visa SavingsEdge, you can shop at participating merchants and save 15%.
3. Secured Mastercard From Capital One
If you’re looking for a credit card with a 0% annual fee and only requires a $49 security deposit, consider Capital One’s Secured Mastercard.
Features worth noting:
- The minimum deposit will earn you an initial credit line of $200. To get a higher credit line, you just need to deposit more money into your account. You can also gain access to a higher credit line if you pay your first 5 monthly payments on time. (Should you wish to close your account and have no outstanding balance, you can get your deposit back in full.)
- You can personalize your monthly due date. Capital One lets you pay through check, online or through a local branch.
- After making the initial deposit, you’ll receive your Capital One Secured Mastercard in 2-3 weeks.
- Purchases and transfers have an APR of 26.74%, which is higher than the 2 cards that are also in this list. Cash advances have an APR of 26.74%.
- Using this credit card also has perks such as no transaction fees, 24-hour travel assistance, auto rental collision damage waiver, travel accident insurance and extended warranties for purchases made with the card.
- Using Capital One’s mobile app, you can review purchases, pay bills and manage your account while on the move.
- You can even review your credit score through CreditWise, a free credit score monitoring tool (using the tool won’t affect your credit score).
- As for late fees, you will have to pay a $39 fee if you can’t pay on time.
If your card gets stolen or lost, you aren’t held liable for any purchase made afterward. You can even use Card Lock to prevent thieves from using it. You’re alerted if there are charges made.
You also can get private card numbers for business people who enjoy buying equipment online. Through the virtual card number, you can shop online without risking the actual card number.
You can make partial payments to your security deposit. However, you need to pay the full amount within 35 days of being approved. The card will only be sent to you after the required deposit is fully paid.