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A Secured Business Credit Card: Empowering Financial Growth

Živile Šarkauskaite

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Živile Šarkauskaite

November 21, 2023

Entrepreneurs actively leverage secured business credit cards as invaluable assets in small business finance. In this article, we will explore the intricacies of these financial tools, examining their features, benefits, and strategic applications for fostering business growth and financial stability.

What is a secured business credit card?

A secured business credit card requires a security deposit, distinguishing it from traditional cards. Upon approval, the business deposits collateral into a bank account. It establishes a credit limit equal to the deposit.

However, the security deposit cannot be used for monthly bill payments and remains inaccessible during the secured period.

Responsible management has the potential to foster a positive business credit history and score, possibly facilitating access to non-secured financing. The business gets its deposit back upon closing the account or qualifying for an unsecured card upgrade.

How do secured business cards work?

The secured business credit card operates like a standard one. All transactions and payments are reported to major business credit bureaus, contributing to the establishment and development of credit history.

However, designed for business expenses, a business credit card is inappropriate for personal purchases.

When applying for a secured credit card, you must make a refundable cash deposit. It serves as the credit limit. This deposit, facilitated through debit or electronic transfer, is collateral for potential debt. However, there is no way to use a security deposit to pay off your monthly credit card bill.

Approval is typically swift, and the secured credit card arrives in the mail a few days later for immediate use upon activation.

While using this card, you’ll receive a monthly statement detailing all transactions for the billing cycle. Failing to pay the balance by the due date results in the balance rolling over to the next month, accruing interest based on the card’s APR.

Consistent, on-time payments may qualify you for an unsecured business credit card.

Credit limit

There is no fixed average business credit limit. It varies among businesses based on their type and size.

When determining a credit limit, the business credit card issuer may consider several factors, including the business credit scores, revenue, credit history, and current debt obligations.

For new businesses that haven’t established credit yet, lenders are likely to examine the personal credit of the business owner.

Before applying for a secured credit card, ask how much of your available monthly credit you use. If you use nearly all of it, consider requesting a higher limit to provide more flexibility in case of unexpected costs.

Moreover, if you consistently pay off your balance in full each month, evaluate whether seeking a higher limit is necessary. Requesting an unnecessary increase could result in accumulating more debt and paying increased interest.

Evaluation of secured business credit cards


The primary motivation for obtaining a secured credit card is to build or rebuild your business’s credit history, fostering good financial habits and contributing to an improved credit score.

Furthermore, these cards act as stepping stones to unsecured credit, typically being less complicated to qualify for, irrespective of your credit score, due to the provided deposit.

Additionally, a secured credit card assists in tracking all business expenses in one place, offering potential rewards and business-related benefits, such as travel insurance or cashback on eligible purchases.

Furthermore, the security deposit for secured business credit cards is refundable. You will get your deposit back after paying the balance and closing the account.

Alternatively, demonstrating responsible credit behaviour may qualify you for an unsecured card, leading to the return of your deposit.


Secured business credit cards entail an upfront deposit, determining the credit limit, which may initially be low if funds are limited.

Moreover, some cards in this category might include an annual fee. While certain secured cards may waive annual fees, they may involve other activity fees and higher interest rates.

Furthermore, as the deposit typically doubles as the credit limit, secured business credit cards usually come with lower credit limits than unsecured credit cards.

How do you choose a secured business credit card?

With the wide choice of secured credit cards, it may be difficult to decide where to put your money and faith. Therefore, knowing where to look is essential. Here are some aspects that you should consider.

Annual fees

Some secured credit cards may impose such fees. Therefore, it’s advisable to explore fee-free options. 

Paying upfront fees will reduce your initial credit limit bank deposit, starting your credit-building journey with limited credit availability.

Minimum and maximum deposit amounts

Ensure you have the necessary cash for the minimum deposit, and if you only have one card, verify that your intended business spending won’t exceed 30% of the total deposit amount. It prevents high credit utilisation, avoiding potential negative impacts on your credit score.

Card reports to all three credit bureaus

The essence of a secured credit card lies in its credit-building potential, emphasising the importance of ensuring that your card reports credit activity to all three bureaus.

Fees and fine print

Be vigilant for hidden fees, as some secured credit cards may charge application fees, monthly maintenance or other fees.

Personal credit rebuilding 

Focusing on improving poor credit first is often more sensible, given the wider range of personal secured card options available. After enhancing your credit profile, explore the best business credit card options.

How to use a secured business credit card effectively?

While it is clear that a secured credit card has many advantages, the effective use of it is another question. For that, there are some strategies that you can use to maximise the benefits of a secured credit card.

First, monitor your credit score. When it improves, inquire with your card issuer about upgrading to an unsecured card.

Always pay your balance in full before the due date to avoid interest charges. Remember, secured cards typically have higher interest rates than unsecured credit cards.

Also, try to use the card occasionally, making one or two small purchases every month.


Can you get a secured credit card for your business?

Big and small business owners, including freelancers and independent contractors, can apply for a business credit card.

Using a dedicated credit card for your business streamlines the separation of business and personal expenses, facilitates easy identification of tax deductions, and helps in building your business credit history.

Are secured business credit cards good?

Using secured credit cards responsibly can aid in establishing a business credit score, providing potential advantages when seeking a future business loan, line of credit, or unsecured credit card.

Certain cards also offer rewards and additional business-related benefits, including features like travel insurance.

Can I get a secured business card without paying a security deposit?

To get a secured credit card, you must make a cash deposit. This deposit minimises the risk for the issuer, making these cards a suitable option for individuals with bad credit.

Do secured business credit cards help build credit?

A secured business card is an effective tool for establishing or rebuilding your credit. Once you apply and receive approval, you’ll need to make a refundable cash deposit.

How fast can a secured business credit card build credit?

While we can’t say exactly when your credit score will improve, using a secured card has the potential to boost it quite quickly. It is especially true if you focus on the main factors that make up your credit score.

What is the difference between secured and unsecured business credit cards?

Both secured and unsecured credit cards exist, with unsecured cards lacking collateral. In contrast, a secured credit card relies on a security deposit, where the deposited amount or part of it determines the credit line. Secured cards cater to those with poor or limited credit history, offering a means to establish and build credit.

What’s the difference between a secured business credit card and a small business credit card?

Even though a secured business credit card and a small business credit card (a.k.a. unsecured business credit card) sound similar, there are some crucial distinctions you should know, especially, if you are a small business owner.

 Secured business credit cardSmall business credit card
Collateral requirementNeeds collateral, often a cash deposit or savings accountDoes not require collateral
AccessibilityIs often easier to get, even with a low credit scoreDepends on the applicant’s creditworthiness
Credit limitMatches the provided collateral.Depends on creditworthiness, considering factors like credit history, income, and business financials
Credit history buildingHelps to establish or rebuild credit historyProvides flexibility for day-to-day business expenses and cash flow management

Remember, if you use a secured card responsibly and consistently make on-time payments, you may improve your score and qualify for an unsecured business card. Understanding these distinctions is crucial, particularly for small business owners deciding between the two types of credit cards.

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