How to choose the right secured business credit card

Growing your business can be difficult if you don’t have access to consistent funding for everyday expenses. When your credit score is less than great, getting a business credit card can seem impossible. That’s where secured credit cards come in.

A secured business credit card works just like any other credit card — but to get the card, you must put down a security deposit. The amount you deposit usually determines your monthly credit limit – so if you provide $5,000, you could have a monthly credit limit of the same amount.

Most banks and credit card providers don’t offer secured business cards, so it may be difficult to find more than one or two on the market at one time. You will typically need to contact a bank to ask if they offer a secured business card – most providers don’t list them online.

While we don’t have any secured credit card offers at the moment here’s a range of non-secured business credit cards.

Compare business credit cards available in Canada

What is a secured business credit card?

A secured business credit card is geared towards business owners who can’t get an unsecured card because they have fair, poor or no credit. To get a secured card, you’ll need to provide a deposit which serves as collateral. The deposit amount that you provide typically becomes the monthly credit limit of your card.

After making on-time payments for a year or so, your provide may increase your credit limit. Eventually, your provider might transition you from a secured to an unsecured credit card. This will depend on your payment history, credit score and your ability to responsibly borrow money.

Where can I find a secured business credit card?

There are not many secured business credit cards on the market. As mentioned above, you will likely need to contact a bank and ask if they offer a secured card – you can’t usually see the details or apply for them online. You’ll need to visit a branch in-person or call to find out more about these types of cards.

How is a secured credit card different from an unsecured credit card?

With a secured credit card, you’ll need to provide an upfront deposit to serve as collateral. This deposit isn’t required with an unsecured card. Although you can’t use the deposit after you open the card account, you’ll typically get the deposit back once you pay off your balance in full and close the account.

A secured credit card is a great option for a new business owner who can’t qualify for a traditional credit card. It can give you time to build your credit score while you’ll still have access to credit to grow your business.

Why does a secured business credit card require a deposit?

Secured cards are most commonly used by individuals who don’t have the necessary credit score to get an unsecured credit card. Because these consumers are seen as more likely to default on their debt, issuing banks and credit card providers use the deposit as protection against missed payments. So if you don’t pay off your balance, the provider can recoup their loss by seizing your deposit.

Why does your business need a credit card?

Using a business credit card has many benefits including:

• It makes it easier to separate your personal and business expenses.
• It can make accounting and expense tracking simpler and cleaner.
• Depending on your credit limit, you could make larger purchases upfront to get your business running.
• You can use your credit as a revolving operating loan during business launch or tight financial times.

How to choose a secured business credit card

There aren’t many options for secured business credit cards on the market. Not all banks offer them – instead they may offer a prepaid business card or an unsecured business card. To narrow down the best business card for your needs, consider the following factors:

• Annual fee. Most secured credit cards charge an annual or monthly fee.
• Rewards. Secured cards typically don’t offer the same kind of rewards as unsecured business credit cards. However, earning rewards is a secondary benefit, as your main goal will probably be to build your business credit.
• Minimum security deposit. Most secured credit cards require a minimum security deposit of $500.
• Maximum security deposit. You may want a very high credit limit — in that case, look for a card with a high maximum security deposit, such as $10,000.
• Cost of employee cards. Some providers charge for additional employee cards. If you need extra cards, contact the provider before applying and ask how much they charge per supplementary card.

Compare business cards for no credit

What fees does a secured business card have?

• Security deposit. Consider what you want your credit limit to be and make sure you have that amount available in cash before applying for the card.
• Annual fee. Most secured cards charge either an annual fee or a monthly fee.
• Per-card annual fees. You could pay an annual fee for each additional card that you hand out to employees.
• Late payment, overlimit and returned payment fees. Any of these fees could trigger a penalty interest rate or fee, so check your card’s rate table.
• Foreign transaction fees. You’ll typically be charged 2.5% for using the card overseas or shopping on foreign websites.

Pros and cons of secured business credit cards

How to apply for a secured business credit card

To apply for a secured credit card for your business, do the following:

1. Find a provider who offers a secured business card. Check with your current bank. If they don’t offer a secured business card, shop around and consider another provider that does.
2. Apply for the card in-person. You will most likely need to fill out a personal guarantee for the card, even though it’s a business card. This makes you personally responsible for the card’s balance. Have your Social Insurance Number ready, along with your company’s business number.
3. Bring financial documents. These might include revenue figures and your banking information.
4. Provide your deposit. Once you’ve been approved for the card, you’ll need to provide the lender with your deposit.

What’s next?

After you get your secured business card, focus on making your monthly payments on-time and in full to prove to the credit card bureaus that you’re a reliable customer. As you continue to use your card, your provider might periodically review your account to see if you’re eligible for an upgrade to an unsecured business credit card. You can also call the provider and request a credit account review.

Once your credit score has improved, you can look forward to choosing from a variety of different unsecured business cards, where you’ll be able to earn rewards such as cash back, miles or points.

How to build business credit

Frequently asked questions

• What happens to my security deposit once I provide it?

  If you make your payments on-time and adhere to your provider's terms, your deposit is 100% refundable when you close your account. If you don’t make your payments in a timely manner, or default on your payments completely, your provider may elect to seize your entire deposit.

• How do you choose the right secured business card?

  Although most secured business cards will function the same, there are differences in annual fees, rewards and other features. If you’re just getting started, look for a card that charges less in fees and interest charges. But remember, your choices are slim as there aren't many secured business cards on the market.

• Will my security deposit earn interest?

  No, most providers won't pay interest on your deposit.

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