Credit Card Stacking & Using It to Fund Your Startup

Credit card stacking is the practice of applying for multiple credit cards at the same time to access a larger unsecured line of credit. Once approved, you can use your stack of credit cards to finance a startup, small business, or real estate deals. This works as an alternative working capital funding source for businesses.

Seek Capital specializes in helping startups access the funding they need to grow. One of the funding solutions they can assist with is credit card stacking. Seek Capital charges an origination fee of 9.99% for the lines of credit they establish, and an online application can be completed in about two minutes.

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What Is Credit Card Stacking?

Credit card stacking is a type of unsecured financing option that lets you acquire a larger credit line by opening multiple credit cards. It allows you to use two or more credit cards as a “stack” and use the combined credit limits to fund your business. This is a good way startups and low-revenue businesses can fund their businesses.

How Credit Card Stacking Works

Credit card stacking lets you use a “stack” of cards to fund your business instead of having one unsecured business line of credit for business financing. The combined limits of your stack represent your unsecured line of credit, which can be used repeatedly. Because business credit card stacking involves an unsecured business line of credit and is considered high risk, most providers typically require credit scores of at least 680 to qualify.

Some additional key things to know about how credit card stacking works are:

• Your limit is revolving: Anytime you draw on your credit limit, you must repay your balance on a monthly basis. Once you repay the amount you borrowed, it will be available to use again.
• You’ll accrue interest on unpaid balances: If there is a remaining balance on your monthly statement, it will accrue interest until it has been fully paid off. If you need to carry a balance beyond any interest-free promotional period, a term loan is a better option.
• No collateral is required: With an unsecured credit card, you won’t be asked to pledge either specific business assets or personal assets as collateral.
• You’ll need to provide a personal guarantee: A personal guarantee gives your lender the right to pursue your personal assets if your business fails to repay its debt obligations.

While there are credit card stacking companies that can do this for you, like Seek Capital, you can also do it on your own. Credit card stacking companies will submit the applications for you in aggregate and can help minimize multiple hard credit pulls on your personal credit report. However, they’ll charge you an annual servicing fee of 8% to 15% for their services, which can quickly add up.

Who Credit Card Stacking Is Right For

Credit card stacking is best for those who are looking to fund their startups but may not qualify for traditional business financing options such as SBA loans, a business line of credit, or a working capital loan. Made available to startups and low-revenue businesses, this option is also great for people looking for quick funding.

Credit card stacking is right for:

• Startups: This financing option is perfect for individuals looking to fund their startup and access additional capital quickly. It’s available to most startups since qualifying is often based on your personal credit score.
• Low-revenue businesses: Businesses that are already in operation can still use credit card stacking for funds if their revenues are relatively low. This is a good option for low-revenue businesses because your personal credit score is often used for qualifying and low annual revenues won’t typically disqualify you from this financing option.
• Quick funding needs: You can typically get approved and receive your cards within seven to ten business days.

To get started with credit card stacking on your own, compare the best small business credit cards to understand their costs, reward programs, and where to get them. Your spending goals and the rewards or benefits you want to receive likely determine which cards are right for you.

Credit Card Stacking Costs

The two main costs of credit card stacking are interest rates and annual fees. Some credit cards offer an introductory period with 0% interest for the first six to 18 months. Once this ends, you will owe interest on any unpaid balances. Also, you can expect to pay an annual fee of around $50 to $100, which is sometimes waived for the first year.

The following are typical costs associated with credit card stacking:

• APR: 11% to 25% variable, which adjusts with the prime rate
• Annual card fees: $0 to $500 or more, sometimes waived for the first year
• Servicing fee: 8% to 15% of your credit limit if you use a credit stacking lender for their services

Some of the best small business credit cards offer a low or 0% promotional interest rate. If you draw on your line of credit and pay back what you borrow in full within the promotional period, it’s like borrowing interest-free. Keep in mind, though, that the amount of interest you pay will vary by card and it’s important to keep track of the interest details for each card.

4-Step Credit Card Stacking Walk-through

While you can use credit card stacking companies, you can also do it on your own and save yourself the expensive (8% to 15%) annual servicing fees. You can do this by getting prequalified, choosing the best credit cards, submitting your applications, and receiving your cards in seven to ten days.

1. Get Prequalified

Credit card providers qualify you based on your personal credit history, type of business, business and personal income, and business credit history. A great way to know if you’re likely to qualify is by checking your credit score to see if it’s at least 670.

If your credit score isn’t strong, you can find a personal guarantor who is willing to allow the bank to rely on their personal credit score and agree to pay the bank back if you can’t. In return, you can provide him or her with some percentage of sales or equity in your business.

2. Choose Your Credit Cards

Understanding how to choose a credit card for your stack is a key part of credit card stacking. Your business’ spending goals and the rewards or perks you want to receive will likely determine which credit cards would best fit your “stack.” Be sure to examine the costs and fees too, such as the annual card fee and potential APRs. Compare the best credit cards to find the right one for your business needs.

3. Submit Your Applications

The best small business credit cards allow you to get a business credit card online and get a decision in minutes. It’s important to know when applying for different cards that multiple hard credit checks could have a negative impact on your credit score. You should limit the number of cards you apply for to minimize the negative effect.

4. Receive Your Credit Cards

After the credit card providers review your applications, you will receive the cards that you qualify for, which often takes between seven and ten days. These can be used as your business unsecured line of credit to help with funding your startup. Each monthly statement will require you to make at least the minimum payment for each card, and any unpaid balances will accrue interest over the next billing cycle.

Pros & Cons of Credit Card Stacking

Credit card stacking can help you fund your startup by using multiple credit cards to access working capital. The pros include that it’s a good option for new businesses, there’s no collateral required, and the funding process is quick. However, you must have a credit score of at least 670, make monthly payments, and possibly deal with interest.

Pros of Credit Card Stacking

• No collateral required: Credit card stacking is considered an unsecured financing option. This means that there is no collateral required when opening an account.
• Helpful for new businesses: New businesses may want to look to card stacking as a relatively inexpensive option. It’s available to most startups and low-revenue businesses, since qualifying is often based on your personal credit score. Plus, your time in business and low annual revenues generally won’t disqualify you from this type of financing.
• Quick funding: Another plus of card stacking is how quickly you can access additional capital. You can get funding possibly as quick as seven to ten days and have access to use your business unsecured line of credit.

Cons of Credit Card Stacking

• Good personal credit score (at least 680) required: Although it is a relatively inexpensive way to finance a startup, you need to have a good personal credit score to qualify.
• Interest charges could stack up: If you don’t pay your balances off every month or within a promotional period, it could get expensive fast because the ongoing APRs are often between 11% and 25%. If you can’t pay the balance off, a term loan would be a better option.
• Monthly payments required: Having multiple credit cards means having to keep track of multiple monthly statements. It’s important that you make payments on time to avoid any late fees or possible interest on the following month’s statement.

Credit Card Stacking Frequently Asked Questions (FAQs)

We covered a lot of information on stacking credit cards as a method of financing and on credit card stacking companies. There are some questions that are asked more often than others, and we address those here. If you have any other questions, feel free to comment below, and we will provide an answer.

How does credit card stacking work?

Credit card stacking allows you to use your combined limits from your multiple credit cards as an unsecured line of credit to fund your business’ financing needs. Just like a typical credit card, your credit limit is revolving. Your balance should be paid on a monthly basis, and it will become available for use again once paid.

Can I use credit card stacking to fund my startup?

Credit card stacking can be used to fund your startup. By applying for cards with 0% APR, it’s like you’re getting an interest-free, unsecured line of credit. This is a good option for startups because you can use all of your available credit without hurting your credit score, as long as you make the minimum payment.

What happens if you stop paying your credit card?

If you stop paying your credit card, the issuer will contact you regularly and attempt to collect payment. If no payment is made after 180 days, your debt will be charged off and will be sold to an external collection agency or sent to in-house collections. You’re still liable for the charged-off account, including fees and interest charges, until it’s repaid.

Bottom Line

Credit card stacking is an alternative form of unsecured business financing, but it does have its benefits. By stacking multiple credit cards, it’s possible to fund your startup through an unsecured line of credit. Card stacking is a good financing option if you are having trouble qualifying for an SBA loan or want to earn cash rewards.