Secured business credit cards can be valuable tools for businesses looking to establish or rebuild their credit history. In this post, we'll explore what secured business credit cards are, how they differ from traditional small business credit cards, how to use them effectively, and the pros and cons to consider.
We'll also help guide you to the best secured business credit cards of 2024, based on your specific needs.
What is a secured business credit card?
A secured business credit card is a type of card that requires a cash security deposit to open the account. This deposit acts as collateral, reducing the risk for the card issuer. By using a secured business card responsibly, you can build a positive business credit history.
What's the difference between a secured business credit card and a small business credit card?
There are 2 types of small business credit cards—secured and unsecured. Secured credit cards require the company to make a cash deposit up front. If you want a card with a $5,000 credit limit, you'll need to deposit $5,000 to guarantee that credit line.
Why would a company give a bank cash only to borrow that money back again? To build its business credit score. By proving that the business can use credit responsibly, the company will gain access to other forms of credit over time.
Secured cards are typically easier to qualify for, making them a good option for business owners with poor or very little credit history. Lenders are also willing to offer good interest rates on secured credit cards because the risk to the lender is very low.
By contrast, an unsecured credit card does not require a cash deposit. They offer companies access to a line of credit without cash collateral.
How to use a secured business credit card effectively
If you're using a secured business credit card to improve your company's credit score, the most important thing is to pay your credit card bills in full and on time—and to make sure you choose a card that reports your payments to credit bureaus so those payments can raise your score.
Just like your personal credit score, there are business credit scores too. These are reported by Dun & Bradstreet, Experian, and Equifax, which are the 3 major business credit bureaus.
And, like you would for a personal credit card, you'll want to keep an eye on your spending to make sure you stay within your credit limit and look for cards with rewards programs that can benefit your business.
Pros and cons of a secured credit card
Here are some benefits and drawbacks to consider when shopping for a secured business credit card.
Pros
Credit building: Secured business credit cards can help small business owners with limited or poor credit history build business credit with a positive credit profile. By making timely payments and managing credit responsibly, businesses can improve their credit score over time.
Easy approval: A business secured credit card is often easier to qualify for compared to unsecured business credit card. This can be beneficial for new businesses or those with less-than-perfect credit.
Rewards and benefits: Some secured business credit cards offer rewards programs, cashback incentives, or other benefits. These rewards can help lower expenses for eligible purchases.
Separation of business and personal finances: Using a secured business credit card can help separate business expenses from personal expenses, making it easier to track spending and manage finances, especially at tax time.
Upgrade opportunities: With responsible credit management, businesses may have the opportunity to upgrade from a secured business credit card to an unsecured card in the future.
Cons
Security deposit required: Secured business credit cards require a cash security deposit, typically equal to the credit limit. This deposit is used as collateral in case the business fails to make payments.
Lower credit limits: Secured business credit cards often come with lower credit limits compared to unsecured cards. This can restrict the amount of credit available for business expenses.
Annual fees: Some secured business credit cards may charge annual fees, reducing the overall benefit of using the card.
Credit reporting not guaranteed: Not every secured business credit card reports credit usage and payments to commercial credit bureaus. Be sure to choose one that does if you're using a secured card to raise your credit score.
Restrictions for sole proprietors: Some secured business credit cards are only available to incorporated businesses, limiting access for sole proprietors and unincorporated businesses.
Best secured business credit cards
Details included in this chart are as of April 2024. They may be subject to change. Please check with each business credit card provider for the latest, most up-to-date information.
Want a corporate card with no up-front cash deposit?
When considering business credit cards, be sure to compare annual fees, rewards programs, and opportunities to build credit history.
The BILL Divvy Card powered by Visa* is a standout option with no annual fee, an excellent rewards program to help your organization save money, and automatic reporting to commercial credit bureaus.
Better yet, the BILL Divvy Card requires no cash collateral, and it does not require a personal guarantee—meaning the business owner is not personally liable for the card, and the credit line does not count against the owner's personal credit.
The card also comes with free-to-use BILL Spend & Expense software that offers:
- Better budget control. CFO Lou Lombardo of Golf Genius says, “I believe we’re saving thousands of dollars a quarter as a result of real-time budget tracking. Before Spend & Expense, people would ask where they were against their budgets, and now we know.”
- Streamlined expense management: With BILL Spend & Expense, Protomet cut their monthly 15–20 hour expense reporting process down to about 15 minutes.
- Virtual cards for fraud protection: “Budget owners in all five Jump departments have started using virtual cards—each generated with different account numbers—to pay for ongoing subscriptions. That means more control of departmental expenses and less anxiety about keeping card information secure.”
- A mobile app that makes it easy to capture receipts on the go. According to James Streeter, AP Manager at Westland Construction, “What used to take 90 hours a month, takes two. Card users get a notification, take a picture of their receipt from the app, and we close the books. With BILL Spend & Expense, click some buttons, you’re done.”
Don't choose a business credit card until you've seen what the BILL Divvy Card can do for your business.
Secured business credit cards FAQs
Here are a few quick, easy answers to some common questions about secured business credit cards.
Is there such a thing as a secured business credit card?
Yes. Secured business credit cards require a cash deposit as collateral.
Can you get a secured business credit card in your business name?
Yes. Secured business credit cards are available for businesses to build credit history. Just be sure that the card you choose is one that reports your credit usage and payments to the 3 main commercial credit bureaus.
How to get a secured business credit card
Apply for a secured business credit card with a financial institution, provide a cash deposit as collateral, and use the card responsibly to build credit history over time.
*The BILL Divvy Card is issued by Cross River Bank, member FDIC, and is not a deposit product.
