Secured Business Credit Card versus Unsecured Business Credit Card

A history of bad credit can make it very difficult for business owners to apply for new accounts.  Whether you’re applying for a business loan or a business credit card, you may find that it’s a lot more difficult to get approved for the best deals because of bad credit.  

Nevertheless, there are business credit cards that are especially offered for people with imperfect credit rating.  These credit cards are meant to help entrepreneurs to get the financial assistance and to give them a chance to rebuild their damaged credit.

There are two types of business credit cards for bad credit - the secured business credit cards and the unsecured business credit cards.  What are their differences and which one should you choose?

The Difference Between a Secured and an Unsecured Credit Card

A secured credit card requires the applicant to submit a security deposit in his account.  This deposit cannot be withdrawn and would only be used in case the business credit card holder fails to keep up with his payments.  Thus, the credit card company is confident that should the card holder defaults on his debts, they can simply use the security deposit to pay for the unpaid charges.

Understandably, the credit limit given would also depend on the amount of money deposited by the credit card holder.  A security deposit usually ranges from a low of $300 to $1,000 or more.  Consequently, if you’ve only submitted $500 as security deposit, your credit line may also be limited to An $500 only.

What about an unsecured credit card?  As its name implies, it does not require any form of security from an applicant.  Nevertheless, because of the high risk involved, credit card companies also charge higher interest rates and more expensive penalty fees for these cards.  Of course, such charges can be avoided by paying off monthly charges in full and submitting payments on time.  

Which One to Choose?

If you intend to use your business credit card on huge expenses each month, a secured credit card may not be a practical choice for you since your credit line is subjected to the amount of your security deposit.  In this case, an unsecured card would give you the freedom to use your card even for large purchases.  As long as you can pay off these charges on time, you should have no problem using an unsecured business credit card.  On the other hand, if you intend to use your business credit card only for emergency expenses, a secured credit card is a good choice because it minimizes your risk of debt and overspending.  

When choosing a secured credit card, see to it that the card regularly reports all your payments to the credit bureaus so you can improve your credit history at the same time.  Take note that not all secured credit cards provide this service so you’ll want to make sure that your preferred business credit card does offer this very important feature.

Pamela Williams is a Loan Consultant, Internet Marketer, Writer and owner of BusinessCreditCardSite.com, a finance company Las Vegas Nevada providing support for businesses all across the US particularly with obtaining business credit cards. Visit www.BusinessCreditCardSite.com

Best way to accept credit cards for small business owner?

I am starting a small business and I need to be able to accept credit cards. I have heard a lot of bad things about Pay-pal and I would like to avoid using Pay-pal. Besides, I will need to be able to just swipe a card and quickly move on to the next customer. Also, my personal credit rating is not good, and it seems like most of the options I have seen require a credit check. Does anyone have any suggestions/advice about accepting credit card payments for a small business owner without good credit?

Answer
When it comes to credit card processing there are 2 way to go about this. The first is through pay-pal or a like company.These are what we call in the industry 3rd party payment processors. These types of companies are good only if you are a small company, usually from home and if you are doing under a $1000.00 a month. The pros to this can of account is that it is an easy setup and simple to use. The cons are that it is web based, you as the business owner have no real protection against chargebacks(when a customer dispute a charge) pay-pal is always going to be on the customers side and not yours. Also it takes 4-5 days to receive your money. The 2nd options is opening a merchant account. This is meant for business owners that are doing over $1000 a month. These types of account is for retail locations, over the phone orders and ecommerce. This system is very fast, run a card and within seconds the customer is either approved or decline and then on to the next one. The pros are that you are protected against chargebacks, you receive your money in1-2 days and you have complete control over you account. The cons are it may cost a little more upfront for equipment but most companies can offer inexpensive equipment or possible free. As far as credit score go, merchant services companies are just like any other finance company. Some have very strict policies and some not so strict. Working in the merchant services industry myself I know certain companies that won't touch anything under a 650. On the other hand I know of companies that have a min required score of 500. The nice thing about this is that unlike a finance company which will charge you more because of poor credit, merchant services companies do not. It is either you are approved or not, but you still receive the same price(% rate) regardless of credit score. The last thing is, it also depends on what type of business you have (restaurant, gas station, hair salon, etc) certain companies have an automatic approval policy based simple on the business type. Which means if you business type falls into certain "preferred business type" you will be automatically approved regardless of credit. In the industry we know certain types of companies work better and have less issues than other. To give you an example, if you are a restaurant and go into a bank and try to get a loan, 9-10 banks won't even look at you. However in the merchant services industry if you want an account you will be approved 99.9 out of a 100 times. A merchant services account is just an open line of credit, just like a loan. If i had a little more info I would be able to give you exact details. Hope that this helped. If you need any more info don't hesitate to ask.

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