Business owners with a poor credit score or limited credit history will find it difficult to qualify for an ordinary business credit card. An alternative is to apply for a secured business credit card. A secured credit card is backed by a deposit and helps your business establish or rebuild credit.
Not sure of your credit score? Check your personal and business credit scores for free with NAV. NAV does what is known as a “soft credit pull” which does not negatively impact your credit score. If your credit score is below 620, you will probably have a difficult time obtaining an ordinary business credit card, and may want to pursue a secured business credit card. At the same time, you may want to work on fixing your credit score with a credit repair agency such as My Credit Group.
In this article, we will help you decide if a secured credit card is right for your business and will summarize the features of a leading business secured credit card from Wells Fargo.
Best Secured Business Credit Card: Wells Fargo Business Secured Credit Card
We recommend Wells Fargo’s Business Secured Credit Card because it helps you build your credit while earning rewards. The annual fee and rewards program fee are a bit on the high side, but that’s common with secured credit cards. You can benefit from a relatively low APR and access to a high credit line. We’re covering only the Wells Fargo card because it’s the only secured business credit card that’s available to applicants nationwide.
What kinds of financing are available for businesses with poor credit? We look at 4 options in our guide to Bad Credit Business Loans.
Wells Fargo Business Secured Credit Card
MasterCard Secured Business Credit Card
How Do I Apply?
By phone or at a Wells Fargo branch nationwide
Credit Check Required?
Yes, but those with poor credit or no credit score can qualify.
Credit Line / Security
$500 to $25,000. Your credit line is the same as the amount that you deposit in your collateral account.
Yes, but enrolling in rewards costs $50 per year (waived in first year). When enrolling, choose
APR on purchases
Currently 13.4 % (Prime + 9.90 %)
Not permitted on this card.
Get up to 10 employee cards, each carrying a fee of $25/year
$25 per card
Foreign Transaction Fee
What is a Secured Credit Card?
A secured business credit card is designed for business owners who can’t qualify for other business credit cards due to bad or limited credit history. By making timely payments every month on a secured business credit card, you can build up your credit and eventually “graduate” to an unsecured, ordinary business credit card.
Almost anyone can qualify for a secured credit card because you have to put up a security deposit in a “collateral account” connected to the card. Your credit limit is the amount of money you put up as security. For example, if you deposit $2,000 in your collateral account, your credit limit on the card will be $2,000. This accomplishes two things. It forces you to only make business expenses that you can afford, and it protects the card issuer in the event of default.
An alternative to secured credit cards for those with poor credit is to use a prepaid debit card. However, prepaid cards cannot help you build credit, and you must use caution because many of them are riddled with fees. If you are considering the prepaid route, we like the Bluebird card from American Express because it has the lowest fees.
Why We Recommend Wells Fargo’s Secured Business Credit Card
We like the Wells Fargo business secured credit card because it has a rewards program, a low APR, and a high credit line, all of which are atypical for a secured credit card.
To begin with, there are several secured consumer credit cards, but Wells Fargo is one of the few banks offering a secured business credit card. Having a secured business credit card is important for a couple different reasons. First, it can help you establish or build up your business credit score (in addition to your personal credit score), which comes in handy when applying for a business loan. Second, a secured business card helps you separate your business and personal expenses because it can only be used for business purposes.
The terms for this Wells Fargo card are pretty favorable for a secured card. Wells Fargo gives you the option to pay $50 per year (waived the first year) to enroll in its rewards program. Once enrolled, you can choose to earn either rewards points or cash back, redeemable for gift cards, travel, and more. The APR on this card is currently 13.4%, significantly lower than the 16 % average for secured credit cards. Lastly, you can get a credit line as low as $500 and as high as $25,000, depending on how much cash you have on hand to deposit.
On the downside, you have to pay both an annual fee of $25 per card and an annual $50 rewards fee if you want to earn rewards or cash back. That can be tough for a small business that is already struggling from poor credit, especially one that’s planning on issuing several employee cards. However, if you spend enough on the card each year, the rewards points/cash back will offset the fees. If you’re diligent about making timely payments, you can eventually graduate to an unsecured card, which offers many more perks than a secured card.
How to Apply
You can apply for a Wells Fargo Secured Business Credit Card by phone or in person at a Wells Fargo branch. You can learn about Wells Fargo and our other top picks for small business checking accounts in our article when you click here.
When you apply, you must provide both your SSN and your EIN if your business has one. Wells Fargo will pull your personal and business credit history. Even though they do a credit check as part of the application process, Wells Fargo doesn’t require a minimum credit score to qualify for the secured business credit card.
Wells Fargo reports payments on this card to both the consumer and business credit bureaus. If you regularly make timely payments, you can boost both your personal and business credit score.
Credit Line/Security Deposit
Secured credit cards require an initial deposit that becomes the basis for your credit line. The credit line on a Wells Fargo secured business card can range from $500 to $25,000,
When you open a secured business credit card, Wells Fargo will open an associated collateral account for you. The initial deposit in your collateral account will be your credit line. For example, if you deposit $1,000 in your account, your monthly credit limit will be $1,000.
Make sure you choose your deposit amount carefully. If you want to add more funds later, this will be treated as a request to increase your credit line and requires a second credit check. If you want to withdraw funds from the account, this will be treated as a cash advance and subjects you to a higher 24.24 % APR.
Most secured cards work the same way as Wells Fargo, but a few will limit your credit line to a percentage of your deposit. For example, BBVA Compass’ secured business credit card extends you a credit line that is 90 % of the deposit in your collateral account.
Rewards Points/Cash Back
These days, most people won’t even consider an unsecured credit card if doesn’t offer a rewards programs. Now, secured cards are catching on to the trend. For a $50 annual fee that’s waived the first year, you can enroll in Wells Fargo’s Business Rewards Program. That fee covers the primary cardholder and all employee cards on the company account. Once enrolled, you can choose to earn either rewards points or cash back.
Cash back means that you earn $1 for every $100 spent on the card. Points means you earn 1 point for every $1 spent on the card. We recommend choosing points over cash back for this card because it offers more flexibility. You can redeem points for gift cards, hotels, travel, or if nothing strikes your fancy on the rewards catalogue, trade in your points for a statement credit.
Wells Fargo offers Bonus points or cash back for customers who regularly use the card. Every month that your company as a whole (including all employee charges) spends at least $1,000 on the card, you get 1000 bonus points or a $10 cash rewards bonus credited to your business card account or deposited to your eligible business checking or savings account.
There are two caveats to choosing points, however. The first is that their value will vary based on what you redeem them for (e.g. gift cards, travel, etc.). The second is that Wells Fargo business rewards points expire after 3 years, but cash back never expires.
APR and Balance Transfers
It is always wise to pay off your credit card balance in full every month. This goes for everyone but is especially advisable for someone who’s trying to rebuild their credit with a secured card. If you must keep a balance, then it’s wise to pick a card with a low APR.
APR is the cost of borrowing money on your credit card. The APR for Wells Fargo is currently 13.4 %. The APR on purchases for this card is calculated by adding the Prime Rate (currently 3.50 %) and 9.90 %. At 13.4 %, the APR is actually quite low compared to what some business credit cards, such as Capital One Spark cards, charge. Even our recommended card, Chase Ink Plus, charges more interest. This is a clear benefit of the Wells Fargo Secured Business Card; when you’re trying to repair credit, the last thing you want to deal with is a high interest rate.
Since the APR of this card is pegged to the Prime Rate, it can change based on market conditions. Credit card interest rates have fallen over the last few decades. While there’s no guarantee this trend will continue in the future, there’s usually not a whole lot of variation from year to year.
Remember that your regular APR can change under other circumstances too. If you’re late with a payment, you could face a higher penalty APR. If you withdraw cash using your credit card (cash advance) or withdraw over your credit line (overdraft), you may be subject to a higher APR and other fees. Always review your cardholder agreement carefully, so you understand your APR. Business cards are not covered the the Credit Card Accountability Responsibility and Disclosure Act (or CARD Act) , which regulates interest rates on consumer credit cards.
Wells Fargo Secured Business Card doesn’t allow balance transfers. A balance transfer can help people with credit card debt lower their monthly payments by moving their debt to a low or no-interest credit card. Capital One Spark cards are the best options for balance transfers, but you need excellent credit to qualify.
Annual Fees and Foreign Transaction Fees
Unlike APR, which only affects you if you carry a balance, annual fees and foreign transaction fees affect all cardholders.
The Wells Fargo secured credit card charges an annual fee of $25. This is on top of the $50 fee that is charged for the rewards program. While this seems high, if you charge at least $7,500 per year on your card (giving you $75 of cash back), this offsets the annual fee and rewards program fee.
This card does not have a foreign transaction fee, making this a good choice for business owners who travel frequently.
If you have employees, you may want to issue a credit card to them to use for business purposes.
Wells Fargo will issue you up to 10 employee cards (the card does not say “secured” on it). Your credit line will be allocated among your employees, and you must call Wells Fargo to specify the spending limit on each employee card.
For each employee card, you must pay a $25 annual fee. However, the $50 annual rewards fee covers all cards on the company account. All employee expenses generate rewards points/cash back for your company. For instance, if your employees together charge $1000 to the card in one month, your account gets $10 cash back or 1000 points.
If you have poor or limited credit but money to put towards a deposit, you’re the ideal candidate for a secured credit card. Wells Fargo’s Business Secured Credit Card can help you establish or rebuild business credit, and it features a relatively low APR, high credit line if you deposit a matching amount, and rewards program.
The card does have an annual fee of $25 per card and a rewards program fee of $50, but most businesses will offset this fee with their annual spending. Not to mention, if you enroll in rewards, you’ll be earning points and cash back. Eventually, you will be able to obtain an unsecured card once you establish or rebuild your credit with the secured card.
A poor or limited credit history doesn’t mean you can’t get business financing. We highlight four lenders that loan to businesses with poor credit in our Bad Credit Business Loans guide.