The point of a business secured credit card is to establish credit for your business. When you start a business, it is a non-entity in the world of credit. What’s more, it can take a great deal of time to establish the credit that you need via more traditional methods.
Compare credit cards online by using the free credit card chaser tool today!
You see, with a secured credit card, the credit card company isn’t taking any risks by providing you with credit, however, they report your good standing with the right business credit reporting agencies. This is a much faster way to establish business credit than through vendors who may or may not report your payments to credit reporting agencies!
What exactly is a business secured credit card?
A business secured credit card is essentially the same thing as a personal secured credit card. You deposit money into an account and your credit limit is based upon the amount of money that is in the account.
When you spend money on your credit card, your credit limit is reduced by the amount that you spent, but the money in your actual account isn’t touched. This money is the security that the bank needs to ensure that you have the money to pay for your debt.
Once a month, you pay your bill just like you would any other credit card. When make your payment on time, the creditor reports this information to the credit reporting agencies. In the case of a business credit card, the credit reporting agencies are different from personal credit reporting agencies and include:
Your secured credit card appears on your credit report in the same way as regular credit card. There is no distinction made between the two types of credit.
Are there many fees associated with secured credit cards?
There are quite a few secured credit cards that come with many fees, however, not all of them do. This is why it is so important that you compare credit cards between multiple banks and credit card companies.
Often, banks or credit card companies charge these fees because they have created an actual savings account, of sorts, for you that holds your deposit. What they don’t tell you is that these are usually interest-bearing accounts and the bank or creditor actually keeps the profits from that interest.
This doesn’t mean that all creditors offering you a secured credit card are going to charge you a lot of fees; many have the same exact fee structure that you will find with a traditional credit card. If you don’t shop around, however, you won’t find them!
How long do I need to keep a business secured credit card?
Okay, here’s the rub. You started out with a secured credit card account and established your credit so now you are ready to get your deposit back and close that account, right? The problem is, if you close a long-standing credit card account, it can have a negative impact on your credit.
So, where does this leave you? Well, if you have established good credit for your business, then you need to ask your creditor to convert your secured account to a non-secured account.
Some creditors will actually do this automatically; however, if yours has not and you are getting credit card approvals from other sources, then it is time to require them to offer you unsecured credit as well. If they won’t, then get a couple of other credit cards and close that account.
According to the credit card laws from the Federal Reserve, you can close your credit accounts down for any reason. However, you do need to be aware that if you do this, the credit card company can demand you pay off your debt in full at once. With a secured credit card, this shouldn’t be a problem, but it is something of which you should be aware.
You should be able to establish some decent business credit via your secured card in about a year. It will take longer to establish excellent credit, however.
During this time, you should pay off your debt at the end of each month to keep your debt-to-owe ratio low. What’s more, you should also, whenever possible, increase the amount of money that you have in your account so it looks like you have been entrusted with a high credit line and that you are handling it correctly.
Use the free credit card chaser tool to compare credit cards online!
- What companies will offer me credit cards for bad people?
- Would a small business credit card work for my business?
- Massachusetts Institute of Technology Federal Credit Union Classic Secured Credit Card
- Do bad credit business credit cards exist?
- Are there any credit cards that help rebuild credit?
- California Coast Credit Union Visa Platinum Secured Credit Card
- Platinum Zero Secured Visa Credit Card