Starting a new business is exciting, but with it comes the responsibility of managing finances and building credit. One hurdle that many new entrepreneurs face is limited personal credit, making it difficult to obtain a traditional business credit card. A solution to this issue? Secured business credit cards for new businesses! These cards can help you manage your finances and improve your credit score at the same time. So, let's dive into the world of secured business credit cards and how they can benefit your new business.
Secured Business Credit Cards For New Business Table of Contents
What is a Secured Business Credit Card?
A secured business credit card is a type of credit card that requires a security deposit to be placed as collateral. The deposit acts as a safety net for the card issuer in case the cardholder fails to pay their balance. The credit limit on a secured business credit card is usually equal to or slightly higher than the deposit amount.
Benefits of Secured Business Credit Cards
- Build Credit: Using a secured business credit card responsibly can help you improve your credit score and eventually qualify for an unsecured card with better terms and higher limits.
- Separate Business and Personal Expenses: A secured business credit card can help you keep track of business-related expenses and simplify tax preparation.
- Control Spending: Secured cards typically have lower credit limits, promoting responsible spending and budgeting.
- Employee Cards: Some secured business credit cards offer the option to add employee cards, making expense tracking and management easier.
- Rewards: While not as common as unsecured cards, some secured business credit cards offer rewards programs for your spending.
Choosing the Right Secured Business Credit Card
To find the best secured business credit card for your needs, consider the following factors:
1. Security Deposit Requirements
Consider how much you can afford to deposit as collateral. Cards with higher minimum deposit requirements can offer more substantial credit limits, but this also means tying up more of your capital.
2. Interest Rates and Fees
Compare interest rates, annual fees, and other charges, such as cash advance fees and foreign transaction fees, when choosing a secured business credit card.
3. Reporting to Credit Bureaus
Ensure the card issuer reports your payments to the major credit bureaus (Equifax, Experian, and TransUnion) to help build your business credit.
4. Rewards Programs and Benefits
Evaluate any rewards or benefits offered by the card, such as cash back, travel miles, or purchase protection.
Secured Business Credit Cards For New Business Example:
Jane is a new entrepreneur who has recently started a small online store. She has a limited personal credit history and is having trouble getting approved for a traditional business credit card. After researching her options, she decides to apply for a secured business credit card with a $2,000 deposit, providing her with a $2,500 credit limit.
Using her secured business credit card, Jane purchases inventory, office supplies, and pays for online advertising, making sure to pay off her balance each month. By doing so, she builds her credit score and shows a solid payment history.
After a year of responsible use and on-time payments, Jane's secured card issuer offers her an unsecured business credit card with a higher credit limit and better terms. This allows her to expand her business and continue building credit without tying up her money in a security deposit.
And there you have it! Secured business credit cards for new businesses are an excellent option for those looking to establish or improve their credit while keeping their finances organized. Consider these points when choosing a card that best suits your needs, and watch your new business thrive. Don't forget to share this helpful guide with fellow entrepreneurs and explore other valuable resources on Flik Eco for all your personal finance and investing tips.
