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What you need to know about Secured Business Credit Cards

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Most of us are aware of secured credit cards for consumers. However, with the recent climate of tight lending standards, many businesses are now taking advantage of secured credit cards.

Securing the Money you need for your Business

If you own a business that fell on hard times and as result your business now has poor credit and a bad credit history, your ability to obtain a line of credit may be near impossible. As such, you may have wondered if you can get the extra cash necessary to keep your business running by using a small business credit card.

However, once again, your low credit score will probably inhibit you from receiving a small business credit card.

Rebuilding your Business Credit

If you are in desperate need of a way to rebuild your business credit so that you can once again enjoy the benefits of small business credit cards and lines of credit, then you need to consider obtaining a secured business credit card.

A secured business credit card is one of the easiest ways to build your business’ credit card history back up again. In short, a business credit card may serve as a practical tool for rebuilding your credit. A secured credit card will enable you to prove to creditors that you have established disciplined financial habits. It will also give your credit score a much-needed boost.

Although it may be a bit inconvenient to use a secured credit card because it is necessary that you provide the creditor with a deposit in the amount of your credit limit, if you charge purchases and continue to make timely payments your credit score could start to improve in as little as a few months.

Don’t assume that all secured credit cards are alike, though. It is necessary to research your secured business credit card options before applying for one. There are many websites that will compare secured business credit cards, side by side, to allow you to view different secured business credit cards, as well as their APR, terms and conditions.

Beware of Small Business Credit Cards with Personal Liability Clauses

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Small business credit cards offer many small business owners loads of convenient and practical features that allow them to run their businesses more efficiently; which is why so many small business owners have flocked to small business credit cards over the last, few years.

You may think it is in your best interest to take out a small business credit card for your business, and that generally holds true, but there is an exception to this rule.

As more and more credit card companies put the brakes on consumer credit, there are a number of changes that have also taken place; in particular, there are many credit card companies that include personal liability clauses with their small business credit cards.

Personal Liability Clauses Increasing

A small business credit card that features a personal liability clause is something that you might want to steer clear of, mainly because it means that if you are unable to pay your credit card because your business didn’t succeed, you may be personally responsible for paying back that credit card debt.

In other words, the credit card company can come after you, the cardholder, to pay your business credit card. Most small business owners run their business so that the business’s assets and liabilities remain separate from their own, personal accounts. However, credit card companies, in an effort to recoup some of their losses due to the lousy credit market and equally lousy economy, have started attaching small business debt to the cardholders who own the businesses.

Your Small Business Card may be Linked to your Personal Assets

That essentially means that a creditor may now be able to come after your personal assets if you are unable to pay your small business debt.

Unfortunately, the new credit card legislation does not cover small businesses, leaving many small businesses on their own when it comes to fighting creditors.

It therefore pays to take the time to read the small print of your small business credit card. Ask questions if you don’t understand the card’s terms and conditions and, if the creditor has a personal liability clause in their card’s terms and conditions, consider looking for another small business credit card.

Creditors now Targeting Wealthy Consumers, Small Businesses More than Ever

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Just a few years ago creditors were targeting subprime borrowers as an easy way to make money. This profitable niche has since collapsed, leaving many creditors no choice but to rethink their target customer.

With consumer credit card debt soaring and credit card losses hitting an all-time high, creditors must scramble to pinpoint a new consumer, and it looks like the wealthy borrower and the small business owner are the main targets.

Setting their Sights on the Wealthy, Small Businesses

For example, JPMorgan Chase has begun an effort to increase its market share for wealthy consumers and small businesses. This market was always dominated by American Express, particularly during the last few years when most creditors were jumping on the subprime borrower bandwagon.

American Express, long known for catering to wealthy consumers and corporations, is now recognizing that other creditors are trying to inch their way into this stable market. Although American Express also targeted subprime borrowers over the years, its main business was with affluent and corporate customers.

Other creditors looking to get in on this lucrative market include Discover, Citigroup and Bank of America. These are the same creditors, however, that are struggling with outstanding losses from defaulted subprime borrowers.

JPMorgan has recently launched its newest card for their wealthy customers, called the Sapphire card, as well as three new credit cards targeted at small businesses.

Chase has also stepped up its game and aimed its sights at small businesses, and has the promotional mail to prove it. In fact, Chase has sent out more promotional mail targeted at small businesses than any other credit card company, nearly doubling the number of promotional mailings that they would normally send out.

Many of the credit card companies are looking to enter this lucrative market by offering rewards; however, this may prove challenging, as the rewards offered by American Express are highly valued by customers.

In fact, American Express has been consistently ranked first in JD Power’s annual pool about consumer credit card satisfaction.

In the midst of all of these credit card changes, one thing’s for certain: credit card companies are sure to target the most lucrative customer at any given time.