What is a secured card? A secured card is a type of credit card in which the card is secured by money that you deposit. They are credit cards that require you to make monthly payments. Your credit line may be equal to your initial deposit or may be greater than it, but your purchases are not subtracted from your deposit.
The Federal Reserve reports that secured cards make up less than 1 percent of the credit card market. A majority of secured cards are branded as Visas at 55.5 percent. Among people who kept their secured card accounts open and in good standing for two years, the median increase in their credit scores was 24 points.
Like other types of credit cards, a secured card will require you to make at least minimum monthly payments. If you carry a balance over from month to month, you will be assessed interest on your balance. The interest rates that are charged on secured card balances are often quite high. Some of these cards also charge high annual fees.
A secured card may be used by consumers or businesses. Consumers and businesses that are trying to build their credit or that want to repair credit that has been damaged may benefit from secured credit cards.
Consumers and businesses that get a secured card use them for two main reasons. Consumers and new businesses that do not have credit might get a credit card that is secured in order to help them to establish and build their credit. Consumers and businesses that use secured credit cards for this purpose do so with the goal of eventually qualifying for unsecured credit cards.
Consumers and businesses that have marks on their credit records might also get a secured card to help them to rebuild their credit. If they use the cards properly and pay more than the minimum payment each month, a secured card can help people to gain higher credit scores and the ability to obtain other types of financing.
The term secured card normally refers to a credit card product. However, some people might use the term to refer to a reloadable debit card. Reloadable debit cards require people to deposit money on the cards or in deposit accounts with which the debit cards are linked.
However, a secured debit card does not offer access to a line of credit. When the card is used, the purchase price is subtracted from either the card balance or from the deposit account that is associated with the card.
Secured business credit cards for new business needs can be helpful in some situations. Secured business credit cards for new business needs may give new companies access to a limited amount of financing when they experience cash flow issues and can help them to establish credit.
A small business secured credit card does have its limitations, however. The credit limit on the card might be equal to the required deposit and may be low. Interest rates are often high on a small business secured credit card, and the card issuers may also charge high annual fees.
Finally, small business secured credit cards may not offer features that can help businesses to manage and control their expenses, and they may have few features to help to prevent fraud.
Where you can use a credit card that is secured will depend on how it is branded. Some business secured credit card offers are for cards that are co-branded with specific merchants. Those types of cards can only be used to make purchases from the co-branded merchants.
Other secured credit card offers are for cards that are branded by one of the major credit card processors, including Visa, Mastercard, Discover, or American Express. These types of cards can be used at any location that accepts the major types of credit cards.
The secured credit card business industry offers the following types of benefits to businesses that use the cards:
Despite these benefits, even the best secured credit card will have drawbacks, including high interest charges, relatively low credit lines, the addition to the company’s debt, and few features to help control expenses or to stop fraud and thefts.
Credit cards that are secured may have a few features to help to prevent business fraud. For example, the best secured credit card will likely be a chipped card. A credit card chip offers an added layer of security when purchases are made in person at chip-enabled card terminals.
Some secured credit card companies may offer some types of payment controls to companies to attract their secured credit card business. However, most secured credit card companies offer few features on their business cards because of the subprime nature of the secured card market.
When you read secured credit card reviews, a few disadvantages become apparent. Some of the disadvantages of these types of credit cards include the following:
There are several reasons why you might want to consider a debit card that is secured rather than a secured credit card. When you compare secured debit cards to a secured credit card, you will find that the expense controls that are available on the debit cards are much more robust.
The debit cards also do not add to your debt when they are used to make purchases. Instead, the purchases are subtracted from your own funds. This also means that any balances on your cards will not be charged interest since the money is your company’s money instead of from a credit line.
When you compare secured debit cards to credit cards, you will find the following expense management features in the debit cards:
The best secured debit card should offer the ability to restrict the spending that can occur on the card by time, location, purchase category, and amount. The Bento for Business Visa debit cards have these types of expense control features. Businesses can decide how many cards that they need and then fund each card with an individual amount of money. The business owner can set individual spending limits on the cards according to the needs of each employee. The cards allow you to load them, set limits, and check in whenever you want.
Business owners are also able to see the transactions that are occurring in real time by logging into their online dashboards. They can click on individual employees to see what they have spent and the balances that they have remaining. Business owners are also able to restrict purchases by category or limit the cards so that they can only be used to purchase items from preferred suppliers.
Bento has earned hundreds of positive reviews from its thousands of satisfied business customers. Business owners can ask for a free demonstration so that they can see how the cards work or try them for free for 60 days. To learn more, call a customer service representative at 866.290.4134.
Applying does NOT affect your credit score!*This is not a credit card.
Banking services provided by The Bancorp Bank, Member FDIC. This Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A Inc. and may be used everywhere Visa® debit cards are accepted.