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 come across this issue, it’s advisable that you look for secured business credit cards instead.
Secured business credit cards are different in such as way that they require the client to have a savings account and this account is held by the card company. The client’s credit limit will depend on his/her savings account. For instance, you have a $500 savings account, you’re likely to receive a credit limit of $500 also. 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, this ought to be reflected on a low interest rate .
Second is to ensure that your security deposit will earn interest as well. Since it is basically a savings deposit, it is entitled to earn 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, but paying your dues on time is also important. Avoid paying late and using your savings because this could affect your credit score in the long run.
Secured business credit cards should be managed and used properly. There is no excuse for not paying on time or neglecting your monthly dues. Credit is still credit, so better tackle your dues responsibly and timely.
