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Key takeaways
- If you haven’t established a credit history or have poor credit, you might consider a secured credit card for your business, which involves putting down a cash deposit as collateral for the credit line.
- Before applying for a secured business credit card, review the terms, requirements and benefits to make sure all are reasonable for you.
- Be sure to pay off your purchases in full and on time and keep your credit utilization ratio below 30 percent to demonstrate responsible card use.
Having a dedicated business credit card for your company can be extremely useful. You can separate personal and business spending, which can be helpful when getting your business expenses organized for tax time. Also, many top cards offer business rewards programs, sign-up bonuses, special interest rates and travel perks.
But unsecured business credit cards tend to require good to excellent credit, so not everyone can qualify for the best offers. If you haven’t established a business credit report or your credit is damaged, you might consider a secured credit card where a cash deposit acts as collateral for the credit line. While secured business credit cards tend to offer fewer benefits than unsecured business cards, they can help you receive a line of credit and build a positive credit history over time.
| Credit card | Annual fee | Minimum security deposit (subject to credit approval) | Rewards |
|---|---|---|---|
| First National Bank of Omaha Business Edition® Secured Mastercard® Credit Card | $39 | 110% of the amount of your credit limit (between $2,200 and $110,000) | N/A |
| Bank of America Business Advantage Unlimited Cash Rewards Mastercard® Secured credit card | None | $1,000 | 1.5% cash back on all purchases |
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The First National Bank of Omaha’s Business Edition® Secured Mastercard® Credit Card* is best for applicants who need access to an especially large credit line (subject to credit approval). But you’ll need to put down a security deposit that is 110 percent of your approved credit limit — anywhere between $2,200 and $110,000. You’ll also have to pay an annual fee to carry this card.
While there’s no rewards program, you can enjoy some discounts for dining, hotel, fuel and software purchases with the Mastercard Easy Savings program.
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Pros
- You could have a potentially high credit limit, which might help with your credit utilization if you keep your spending low.
- This card comes with auto rental insurance, especially handy if you travel a lot for business.
Cons
- The annual fee cannot be offset with rewards, so you’ll need to budget for this yearly expense.
- Unlike similar cards, your security deposit is more than your credit limit and on the high side, requiring access to a large amount of immediate cash.
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With the Bank of America Business Advantage Unlimited Cash Rewards Mastercard® Secured credit card*, you can work on building your credit history while earning unlimited 1.5 percent cash back on all purchases. To make this card even more appealing, there’s no annual fee, no annual cap on rewards and your rewards will never expire.
Upon approval, your credit line will be equal to your deposit amount. But keep in mind there is a $1,000 minimum security deposit required to secure a line of credit.
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Pros
- As long as you don’t overspend, this card can give you a taste of a rewards card while you work on your credit.
- Rewards don’t have a spending cap, so all your purchases will earn cash back.
Cons
- The APR for this card can be high, which means carrying a balance could be costly.
- If you travel abroad frequently for work, then you’ll have to consider the card’s foreign transaction fees in your business expenses.
Expert advice on avoiding secured business credit card mistakes
When you are creating or repairing your credit history or forming a relationship with the issuer, it is essential that you treat your secured business credit card carefully. Follow our expert advice to help avoid these business card mistakes:
- Don’t overspend. Stay clear from a cycle of debt or paying a ton of money in interest charges by keeping within your monthly budget.
- Try not to keep a balance on your card. Practice positive credit card habits by paying your balance in full each month and avoiding late payments, which can prove your creditworthiness and boost your credit score over time.
- Be mindful of your credit utilization ratio. Keeping your credit utilization below 30 percent (or lower) can also improve your credit score.
- Don’t wait to contact the issuer if you can’t make your payments. 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 owed from your security deposit.
How to choose a secured business credit card
Before applying for a secured business credit card, consider these questions to see which card might be the right fit for your business needs.
- How much is the security deposit? Make sure you can spare the capital required to secure a line of credit with a secured business credit card. You may not have much cash to put down, and even if you do, you may not want to have your excess cash tied up for a lengthy period of time.
- What are the card’s fees? Review the card’s terms and requirements, including the fine print. The APR and fees should be reasonable for you. For instance, if you prefer a refundable security deposit, make sure you meet the terms and conditions required for a refund.
- Does the card report to the business credit bureaus? If you are looking to build business credit, then look for a secured business card that reports activity to all three major credit reporting agencies every month. With regular reporting, you can keep track of your progress.
Frequently asked questions
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It can. While your business credit score is unique to your business, certain transactions and activity can impact on both your personal and business credit. Plus, some business credit cards might appear on your personal credit report. Check with your issuer to find out which activities might affect your personal credit.
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Business owners should see their credit scores improve over time as long as they use their cards responsibly, and they may start to see positive changes to their scores in as little as a few months.
What’s next?
Bankrate’s card comparison tools can help match you with a card that fits your business needs.
The bottom line
If you’re a small-business owner with no or poor credit, a secured business credit card may be all you can qualify for right now. They can give you the opportunity to either build or repair credit history or form a valuable relationship with the issuer. After that, you may be able to upgrade to an unsecured business credit card or shop around for a business card with rewards. Some credit card issuers will even convert a secured account into an unsecured account after responsible card use, refunding the security deposit. A secured business credit card can be a great way to start or rebuild your credit journey.
*The information about the First National Bank of Omaha Business Edition® Secured Mastercard® Credit Card and Bank of America Business Advantage Unlimited Cash Rewards Mastercard® Secured credit card has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer.
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