Numerous new businesses these days are not qualified for standard business credit cards. This may be due to credit score issues with a creditor or a bank in the past. If you happen to come across this issue, it’s advisable that you look for secured business credit cards instead.
Secured business credit cards are unlike standard business credit cards – they usually require a client to have a savings account and this account is used by the card company as collateral. The credit limit issued to the client will depend on his savings account. For instance, you have a $500 savings account, you’re likely to receive a credit limit of $500 also. Nevertheless, if for some reason, you didn’t pay for your dues and default on your account, the card company will get your security deposit to satisfy your dues.
You should look for secured business credit cards that can assist you in establishing a good credit score. But be aware that not all business credit cards similar terms and conditions, as well as offers.
The first step is to check for reasonable annual fees and interest rates. Search for secured business credit cards which have annual fees below $60 and at least below 12% interest rate. Because the credit card company is assuming minimum risk due to your savings deposit, it should be reflected on the card’s interest rate.
Second is to ensure that your security deposit will earn interest as well. Since it is basically a savings deposit, it is entitled to earn interest over time. As for the credit card company, they can only use that savings interest as determining factor for your credit line and nothing more. The card company is not entitled to that interest because it is your personal savings account.
Third is to sustain a good credit score by paying your dues in time. You may have collateral, but paying your dues on time is also important. Do not use your savings and avoid late payments because your credit score could suffer in the long run.
Secured business credit cards should be managed and used properly. It should not give you any reason to not pay on time or neglect your monthly dues. It’s better to handle your dues responsibly and timely because credit is still credit.