A small business secured credit card can be obtained by the owner of a business by deposit account. Between 100%-200% of the total credit that you want should be put in the deposit account. For example if you put down $3,000 in the deposit account you will be given credit in the amount of $1500 to $3000. There may be incentives offered on your secured card portfolio that states that you only have to put up 50% of the total amount of credit that you desire. In this example you would only put up $1500 for a $3000 credit limit.
The deposit amount is put in a special account for savings. Delinquencies are reduced when the cardholder sees that he has his savings deposit amount to lose. Payments are expected to be made on time on the business credit card. When payments are late or delinquent the bank can then take out the delinquency amount out of the cardholders savings deposit amount.
This type of secured business credit card is for a person with little or no credit history or with a negative credit history. The advantage for the business cardholder is it allows the building of a strong credit history. Banks and credit card companies regularly report to the credit bureaus and to the Better Business Bureau on the regularity of the payments.
The business cardholder savings deposit amount is held as security in case of default. Delinquency of 150-180 days will have to occur before the account is closed. The amount of the deposit is offset by the amount owed on the credit card. For example if $1500 is owed on the business credit card and there is $3000 in the savings account deposit, then $1500 is given to the business card holder when the savings account is closed.
When delinquency occurs over 150-180 days interest and late penalty fees will accrue and may result in the balance on the credit card to be much higher than the amount of the savings deposit. In this case scenario the total debt on the business credit card may far exceed the savings deposit. The deposit will then be forfeited and also be left with additional debt. This only takes place when the cardholder either closes the savings account or the bank closes it to use against the balance of the business credit card.
All of these terms and conditions are put forth in the business cardholder agreement so that he is aware of the risk he will be taking.
Business secured credit cards are offered as options to individuals with poor or no credit history in an attempt to rebuild their credit history to good standing. Fees and penalties far exceed bad credit unsecured credit cards because of the obvious risk to the banks or the credit card companies. If additional debt is incurred to the bank or the credit card companies they could go after the assets of the business if owned by the debtor. It is best then for the banks and the credit card companies to establish the business education of the cardholder before any business between the two transpires.