Secured Business Credit Cards

Fees

What fees and conditions might you expect to see with this type of card? What are the benefits of using this type of card as compared to a 'regular' credit card? These are the two main questions that this article is intended to answer, but you will also learn which credit card companies offer this type of card and what alternatives exist.The fees associated with a secured credit card are usually much higher than you may expect from an unsecured card, in addition to this, monthly and yearly fees also exist.

Conditions

The conditions of this type of card are also less flexible then a normal credit card. The applicant is often required to make a deposit before credit will be issued, and in many cases a loan only equal to the amount on deposit will be extended.

Benefits

The benefits that you may expect to from a secured card often out weight the hefty fees and strict conditions. You are generally offered protection from fraud and unauthorized purchases, you may be eligible for special warranties on business property, and you will be covered with auto rental insurance. These are just a few of the benefits that you will enjoy as a secured card holder, the benefits will be covered more in-depth later in this article.

Credit Card Companies

As you may suspect, most of the large credit card companies offer a secured card in one form or another, but some do specialize in small business cards, and of these some offer better terms and conditions than others, this will also be covered in-depth.

Alternative Options

Alternatives, if you are interested in seeking business credit in another form even after reading about all the benefits that a secured card has to offer, at the end of this article a few will be suggested.

To understand why the terms and conditions are so strict you must first understand the purpose of a secured business credit card. This type of card is designed primarily for new businesses, which have not established any credit history because they are so new, they or have not established enough credit to be considered for an unsecured business credit card.

This can be great for new small businesses epically, because it enables them build a business credit history from scratch. So now that you understand the purpose of a secured card, you will understand why the terms and conditions are the way they are.

When applying for a secured card you can expect to pay an application fee. This can be as low as $50 or as much as $100; it depends on the credit card company in which you are applying. The fees in most cases are not refundable, so you will need to look at this as a necessary business expense.

The interest rates on secured business credit cards are also much higher than unsecured cards, this simply reflects the risk involved for the credit card company; after all if you are a new business, with no credit history, your loan is considered high risk. You can expect to pay an annual percentage rate of around 20% with a cash advance rate of around 22%, and the default rate is even higher, typically around 30%.

In addition to the application fee and the high interest rates you should also know that you will most likely be required to pay an annual fee. These can be as low as $18 dollars, as is the case with Wells Fargo® or as high as $75, as is the case with US Airways Business Card®.

Last, you will need to make an initial deposit into a special savings account, which will serve as for collateral in the event of default. The minimum deposit is typically $300 and the maximum is around $500.

The benefits, in my opinion, out weight hefty fees and conditions; here is a list of the benefits associated with secured business credit cards, below you will find an in-depth explanation of each.

• Overdraft protection
• Extended warranties on business property
• Discounts
• Insurance
• Theft and damage protection
• Protection from fraud and unauthorized transactions

The overdraft protection can be a life saver, especially for a small business. Sometimes you may need to go over your limit a little, and if this happens, you will be protected if your card offers overdraft protection, but you should be aware that not all credit card companies offer this for their card, and some will charge you a $35-$50 overdraft fee.

In addition to the overdraft protection, you will be eligible to receive extended warranties on your office equipment, which can also be of great use.

Nearly all credit cards offer discounts and secured business credit cards are no exception. You can expect to receive discounts on everything from car rentals to plane tickets.

Generally, you can expect to be covered by two types of insurance as a card holder; travel and auto rental. This can be a very valuable perk, especially if you frequently travel abroad, but even if you only travel within your country you will still be covered by the auto rental insurance which typically cost $7 per day otherwise.

Theft and damage protection can be extremely valuable if your business involves the storage of inventory. If your inventory is stolen or damaged, you may be covered under your cards theft and damage policy.

The last, and likely the most valuable benefit, is fraud protection. This simply means that if your card is used without your consent, such as a fraudulent online purchase, your credit card company will erase the charge from your account. I have personally had two unauthorized charges on my account within the past six months, and in both cases the charges were removed within three days.

So, what companies offer the best secured business credit cards? Here is a list of the top three that I have personally researched:

• Wells Fargo
• Orchard Bank
• Bank of America

Make sure to cross compare each, and read the fine print very closely. Also, these are not affiliate links, and I will not profit from your signing up, I am just providing you with information.

If you do not like the whole idea of a secured business credit card, but you still need credit there are other options available. The main two alternative options for small businesses are personal credit cards and starter business credit cards, although the former will not help you to establish business credit.

Starter cards are just what the name implies; they are designed for small business owners who have a good personal credit history. Most credit card companies offer this type of card, but their terms and conditions will vary. Here is a short list of credit card companies that I know of that offer this type of card.

• American Express
• SunTrust
• Regions
• Visa

As for the companies that offer personal credit cards, there really is no reason in listing them; because they all do. Another option that you may want to consider is a same day cash advance, but this is really only usefull as a short term solution.