This article is part of a larger series on Best Small Business Credit Cards.
Credit card stacking is the practice of applying for multiple credit cards at the same time as an alternative financing solution for startups and small businesses. Some business owners, especially those who cannot qualify for business financing otherwise, use credit card stacking to access a large line of credit to fund their working capital needs.
How Credit Card Stacking Works
Credit card stacking works like an unsecured line of credit where you use multiple credit cards to fund your business. The combined limits of your stack represent your unsecured line of credit, which is revolving and can be used repeatedly.
Credit card stacking is considered as an alternative option to a business loan or business line of credit. This is a great option if you don’t have collateral to use for loans. However, because business credit card stacking involves an unsecured credit line, it is considered high risk, so most providers typically require credit scores of at least 680 to qualify.
Here are a few important things that you need to remember about how credit card stacking works:
- Your limit is revolving: You are drawing on your credit limit every time you use your credit cards, and you must pay your balance on a monthly basis. Once you repay the amount you borrowed, the credit limit will be available for use again.
- You’ll accrue interest on unpaid balances: As with any business credit card, the remaining unpaid balances on each of your monthly statements will accrue interest until they have been fully paid off. The interest rates may vary per credit card issuer.
- Collateral is not required: With an unsecured credit card, you don’t need to pledge your business assets or personal assets as collateral.
- You’ll need to provide a personal guarantee: In most cases, a personal guarantee is required for credit card stacking. It gives your lender the right to pursue your personal assets if your business fails to repay its debt obligations.
- You need to pay your credit card balance, including interest and charges: 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 collectors. You’re still liable for the charged-off account, including fees and interest charges, until it’s repaid.
Who Credit Card Stacking Is Right For
Credit card stacking is best for business owners who may not qualify for traditional business financing options like Small Business Administration (SBA) loans, business lines of credit, or working capital loans. This is a viable option for those who need access to capital but are unable to qualify for other small business loans.
Generally, credit card stacking is right for:
- Startups: Credit card stacking is designed for individuals who want to fund their startup but can’t qualify for startup business loans. 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: This is also a financing option for those who need quick funding because you can typically get approved and receive your cards within seven to 10 business days.
- Business owners with no assets for collateral: Another advantage of credit card stacking is that it doesn’t require any collateral, making it a good option for those who don’t have assets to use as collateral.
What Are Credit Card Stacking Companies?
Credit card stacking companies, also known as stacking lenders, are companies that will help you find the right credit cards to apply for and will submit the applications for you. While you can do it on your own, a stacking lender will help you find the best credit cards for your startup and help narrow down your options. However, they typically charge an annual servicing fee of 8% to 15% for their services.
Here are a few things that a credit card stacking company can do for you:
- Find which credit cards you are most likely to qualify for: Credit card stacking companies take into consideration your personal and business credit scores, your business industry, revenues, and other factors to decide which credit cards you will qualify for.
- Find credit cards that offer the best deals: As there are more than 1,000 credit cards in the United States, it would take a lot of time and effort to compare every one of them to find out which ones offer the best terms and deals. A credit card stacking company uses its extensive knowledge of banks and card issuers to help you find the lowest annual percentage rate (APR), best introductory rate, and best deals according to your business’ preferences.
- Protect your credit score: Every time you apply for a credit card, the card issuer pulls your credit, which can harm your credit score. Credit card stacking companies can help protect your personal credit scores by submitting your applications strategically, which reduces the number of hard credit pulls on your credit report.
How Credit Card Stacking Companies Work
A credit card stacking company will look at your credit reports, business industry, revenue, location, and other factors to identify the cards that you will most likely qualify for. Then it will submit applications for both personal and business credit cards on your behalf. Typically, a credit card stacking company will submit around seven to 15 applications at the same time to help you get the total credit limit that you need.
Once approved, you can immediately start using your stack of credit cards as a line of credit to fund your small business or startup. The credit card stacking company will charge you an annual servicing fee ranging from 8% to 15% of your total credit limit. The fee may vary per stacking lender.
You will receive a monthly statement for each credit card and will most likely enjoy an introductory APR of 0% during the first 6 to 18 months. Any unpaid balances after the promotional period are subject to interest. It’s important to keep track of each card’s interest rate, term, credit limit, statement cycle, and due date to avoid unnecessary fees.
Credit Card Stacking Costs
- 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
- Credit card stacking company’s servicing fee: 8% to 15% of your credit limit—applies only if you use a credit card stacking lender’s services
Some credit cards offer an introductory period with 0% interest for the first 6 to 18 months, which may vary depending on the card issuer. If you draw on your line of credit and pay back what you borrow in full within the promotional period, it’s like borrowing money without interest.
Once this promo period ends, the card’s annual percentage rate will apply to your unpaid balances. Keep in mind that the amount of interest you pay will vary by card, and it’s important to keep track of the interest details and introductory rates for each card.
Steps for Credit Card Stacking Without a Stacking Lender
While you can use the services of credit card stacking companies, you can also do it on your own and save on annual servicing fees. Take note that credit card stacking companies will charge you between 8% to 15% of your total credit limit, which can easily add up over time.
Here are the steps for credit card stacking without a stacking lender.
1. Get Prequalified
Credit card providers qualify you based on your personal credit score, type of business, business and personal income, and business credit history. It’s recommended that you have a credit score of at least 680. 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 who agrees to pay the bank back if you can’t.
2. Choose Your Credit Cards
Choosing the right credit cards 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. Examine the costs and fees, including the annual card fee and potential APRs, and find the one that’s right for your business needs.
3. Submit Your Applications
The best credit cards for startups allow you to apply online and get a decision in minutes. It’s important to know that, when applying for different cards, 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
Once approved, you will typically receive your cards within 7 to 10 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
|No collateral required||A personal credit score of at least 680 is required|
|Businesses can take advantage of the multiple 0% introductory rates||Typically have higher interest rates compared to business loans|
|Quick approval and funding||Borrowers need to monitor several credit cards with different interest rates, balances, and due dates|
Credit card stacking is an alternative form of business financing that allows you 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. However, if you don’t want to monitor several credit cards, it’s best to consider applying for other business loan options.