Updated: May 09, 2023

Should You Get a Secured Business Credit Card?

Find out whether it makes sense to apply for a secured business credit card to help build credibility for future business loans and credit lines.
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A business credit card can simplify your business life. It’s a convenient way to increase cash flow and keep your business expenses separate from personal expenses. 

Plus, if your employees make business purchases, there's the option to get employee cards.

Giving them access to a company card might be easier than reimbursing them for certain expenses.

What some people don't know is that you don't have to operate a big company to qualify for a business credit card. You can get a card even if you're a one-man show or a freelancer.

But despite the benefits and accessibility of these cards, getting an “unsecured” business credit card can be challenging.

More so if you have a low personal credit score and no business credit. 

Not to say you can’t get a credit card, but a secured business credit card might be your best option.

What is a Secured Business Credit Card?

A secured business credit card is like any other business credit card. You can use it for business expenses, and each month, you’ll receive a statement with your required minimum payment.

The main difference between an unsecured and secured credit card is that the latter requires a security deposit.

You’ll pay this deposit once you’re approved, usually through a bank draft. But this isn’t a prepaid card. 

The deposit only acts as collateral. So you’ll still make monthly payments. 

The bank issuing your card keeps your security deposit in a savings account, just in case you don’t pay what you owe.

If you haven’t had much success applying for business financing—whether an unsecured business credit card or an unsecured business loan—a secured credit card is worth consideration. 

Before you send off your application, though, make sure you understand the pros and cons.


1. Easier approval process

Some business credit cards require a personal guarantee, so the bank checks your personal credit before granting an approval.

If you have good credit, getting an unsecured business credit card isn’t usually an issue. But a low score or a thin credit history can trigger a rejection. 

Secured business credit cards, on the other hand, are easier to get if your business hasn’t built its own credit, or if you have a low personal score. 

Since these cards require a deposit, banks are more willing to extend credit to those with less-than-perfect credit. If you don't pay, they can use your deposit as repayment.

2. Helps establish business credit

Getting a secured business credit card can also establish your business credit. 

Every time you make an on-time payment, the issuing bank reports this credit activity to the business credit bureaus.

And over time, your score increases.

This can help you qualify for an unsecured business credit card later on. Or perhaps a business line of credit or a business loan.

Just make sure you get a card from a bank that reports to the bureaus on a regular basis.

It’s also important to use credit responsibly. This is how you’ll build a good business credit score. Only charge what you can afford, and pay off your balance in full every month.

3. Earns rewards

Some secured business credit cards also have reward programs where you earn points or cash back rewards. The more you use the card, the more rewards you earn. Redeem your rewards for travel, gift cards, statement credit, and more.

4. Opens the door to an unsecured credit card

After one or two years of timely payments and responsible use, your bank may refund your security deposit and convert your secured credit card to an unsecured credit card. 

This can open the door to a higher credit limit and a better interest rate. 


1. You have to pay a security deposit

The biggest disadvantage of a secured business credit card is that it requires a security deposit. 

So you must have cash available when applying.

Minimum and maximum deposits vary by credit card issuer. Some banks allow deposits as low as $500, and as high as $25,000.

2. Limited credit access

Since your security deposit determines your credit line, getting a secured credit card can limit your access to credit.

If you can only afford a small deposit, the bank isn’t going to extend a huge credit line—at least not to start. 

However, as you pay your bills on time and prove that you’re responsible, the bank may gradually increase your credit line.

3. Annual fee

Another thing to keep in mind is that some secured business credit cards have an annual fee, even those that don’t offer a rewards program. 

An annual fee usually covers the cost of card benefits. The upside is that annual fees aren’t always expensive. For a secured business credit card, they might range from $25 to $50. 

4. High interest rate

Another downside is that secured business credit cards tend to have higher interest rates. 

If you carry a balance from month-to-month, you’ll end up spending more for purchase.

One of the best ways to avoid high interest charges is to pay off your credit card in full every month.

Alternatives and Other Financing Options

While a secured business credit card is easier to get compared to other types of financing, it’s not the only option available to you. 

Another option is a secured business loan. This type of loan also requires collateral. But rather than give a cash deposit, you’ll pledge personal property such as real estate, equipment, or other valuable asset. 

A business loan might work better if you have a lower credit score, yet need a higher borrowing amount.

There’s also the option of a secured business line of credit, which also requires collateral. You can borrow up to a certain amount whenever you need the cash, and only pay interest on what you borrow. 

The line of credit amount might be higher than a credit card limit, increasing your borrowing power.

And since you can tap a line of credit on an as-needed basis, you don't have to apply for a new loan every time you need cash. 

Or, consider a lower-tiered unsecured business credit card. These cards have flexible credit requirements, allowing you to get approved with average or fair credit (but not bad credit). This is another tool to establish and strengthen your business credit, and some cards even feature a rewards program. 

You may pay a higher interest rate, though, so pay the balance in full every month.

Can You Use Personal Credit for Better Chances of Approval?

The short answer is yes. 

When applying for a business credit card, the application will ask for your employer identification number (EIN)—a number assigned by the IRS for reporting purposes—and your Social Security number. 

It’s common for banks to evaluate a business owner’s personal credit, too. If your business doesn't pay back the balance, you’re personally responsible. 

A high personal score means you’re more likely to get approved for a business credit card.

From the bank’s standpoint, if you manage your personal credit responsibly, there’s a good chance that you’ll also manage your business credit responsibly.

Final Word

Starting a business is exciting, but it also requires access to cash or credit.

A business credit card makes it easier to manage expenses and cash flow, and it can establish your business credit. But getting a card isn’t easy for everyone. 

If you’ve had some difficulties getting approved for financing, a secured business credit card might be the way to jumpstart your business credit, and get the funds you need to manage your company.