When you open a new business that has yet to establish a credit file you may need secured credit cards. These cards require you to open a savings account and make a specific deposit amount.
Typically, the credit card you are then issued has a credit line up to the amount you deposited into that new savings account.
Secured Cards Are Widely Used
This type of card is widely used by business owners as a means of paying for basic business expenditures such as basic company supplies or merchandise from vendors
Most major card companies offer the secured business card, but in order to get one you will probably need to put forth some kind of collateral or savings.
Credit lenders want to know that you are a safe investment and they can make a profit from your business dealings.
In addition to putting forth collateral there are normal application and processing fees that cover reference checks and vary from company to company. Some credit lenders also charge an annual fee.
You should also keep in mind that secured cards almost always carry a higher interest rate than standard credit cards.
Interest Rate and Benefits
For businesses, there are some features available that are not offered to individuals with secured credit cards. These benefits may include:
-
Coverage for theft and damage
-
Extended business equipment warranties
-
Travel insurance
-
Auto rental insurance
-
Overdraft protection
-
Protection from unauthorized transactions
-
Discounts offered by the credit card lender
Understand The Terms and Conditions
Before seeking out a business card make sure you understand all the terms and conditions as the risk of defaulting on a payment is high.
A secured business card is backed up by an asset of the business, the business itself, or a piece of collateral owned by the business.
Missing payments may result in much higher fees or penalty interest. If the credit card owner does not pay his or her bill, the credit card company would have the ability to seize company assets or the company itself.
Credit card companies are able to keep lower interest rates for business cards by profiting on business owners who do not pay their bills.
Summary
It is important to make sure you pay off all debts from other credit cards before applying for a business credit card. A secured card with low interest rates can prove beneficial in the long run and may just be the kind of credit your company needs to stay in the game.
