Posts tagged: cash_on_hand

Secured Credit Cards for a Small Business

Credit cards can be a business owner’s best friend. They make it possible for you to pay your monthly expenses without having to drain all your cash. Not to mention you can earn rewards like sky miles just by running your normal business costs through a credit card. But what if your business hasn’t established much credit? Or worse, what if you had some credit cards, but you fell on tough times and your credit was damaged?

Secured credit cards for a small business can be the solution. These cards offer the same credit building benefits of secured credit cards geared towards individuals, but there are some differences.

A good example I found is the Wells Fargo Business Secured Credit Card. Here is a general outline of their offer (taken from their official site):

You can get up to $50,000 in credit extended to you as long as you have an equal or greater amount deposited with the bank.

The interest rate isn’t too high; 9.9% on purchases you make (pretty good considering I’ve seen some with interest rates as high as 24.99% on purchases).

Wells Fargo will even pay you 2.5% on your security deposit for the first year you have the account with them, but after one year it drops to 0.5%

I looked for other offers for small business credit cards secured by deposits, and I couldn’t find too many. Why do you suppose that is? Here are a few ideas I came up with:

Applicants probably won’t have enough cash on hand to put down a big deposit. The deposit is something the credit provider can earn interest on, not to mention it allows them to give higher lines of credit, which pays them higher fees.

The see business that need secured credit cards as too much hassle to work with. Think about it, most businesses fail anyway right? Why would they want to provide a line of credit to a small business that either has no credit or has had a bad experience with credit in the past? Better to offer credit cards to established businesses that will keep the card open for years to come.

Secured credit cards must not be as profitable. After all, we’re talking about credit card companies here. They go where the profits are.

Based on my research, I’d say the Wells Fargo Business Secured Credit Card is the way to go.