Understanding Secured Business Credit Cards

Numerous new businesses these days are not qualified for standard business credit cards. This happens when a company has credit issues with a creditor or bank in the past. If you happen to encounter this problem, it is best that you look for secured business credit cards instead.

Secured business credit cards are unlike standard business credit cards – they usually require a client to have a savings account and this account is used by the card company as collateral. The client’s credit limit will depend on his/her savings account. So if you have a $500 savings account, you are likely to get a credit limit of $500 as well. However, if for some reason, you failed to pay your dues and default on your account, the card company will take your security deposit to satisfy your debt.

You should scout for secured business credit cards that will help you set up a good credit score. But be aware that business credit cards have their own differences in terms of policies and offers.

The first step is to check for reasonable annual fees and interest rates. Look for secured business credit cards that have annual fees of less than $60 and at least lower than 12% interest rate. Because the credit card company is assuming minimum risk due to your savings deposit, it should be reflected on the card’s interest rate.

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The second step is to ensure that your security deposit will also earn interest. This is basically a savings deposit and it should incur interest over time. The credit card company can only use your savings’ interest as determining factor for your credit line and nothing else. The card company is not entitled to that interest because it is your personal savings account.

Third step is to maintain a good credit score by always paying your dues on time. You may have collateral in place, but you still need to pay your monthly dues accordingly. Do not use your savings and avoid late payments because your credit score could suffer in the long run.

Secured business credit cards should definitely be used and managed wisely. There is no excuse for not paying on time or neglecting your monthly dues. It’s better to handle your dues responsibly and timely because credit is still credit .

Article source: http://c-cardsite.com/business-credit-card-2/understanding-secured-business-credit-cards/