Secured business credit card (and why you shouldn’t need one)

If you’ve ever applied for a business credit card with limited credit history, you may have seen secured card offers pop up first. These cards are marketed to small business owners as a way to build credit, but they come with a big catch: you need to put down a cash deposit (often $500 to $5,000) just to access your own line of credit. 

That money is locked away, and the credit limit usually doesn’t stretch far enough to cover real business needs like payroll, marketing, or inventory.

Secured cards can serve a purpose: they help entrepreneurs establish a business credit score by reporting on-time payments to major credit bureaus. But for most companies, tying up cash in a security deposit is an inefficient way to manage working capital.

In this article, we’ll explain how secured business credit cards work, their benefits and drawbacks, and what alternatives can offer your company to increase flexibility.

What is a secured business credit card?

A secured business credit card is a type of business credit card that requires a refundable security deposit to open the account. The card issuer usually sets your credit limit equal to the deposit, which is why these cards are marketed to small business owners with limited credit history or a thin credit profile.

The main purpose of a secured card is to help you build or rebuild credit. When you make on-time payments, your payment history is reported to major business credit bureaus such as Dun & Bradstreet, Equifax, and Experian. Over time, this reporting can improve your business credit score and increase your chances of qualifying for an unsecured business credit card with higher limits and no deposit requirement.

Because the limits are modest and your cash is tied up as collateral, a secured card works best as a short-term tool. It can help establish credit, but it is rarely the right long-term solution for a growing business.

How secured business credit cards work

To open a secured business credit card, you apply with a lender or card issuer, who may run a credit check and often requires a personal guarantee. 

If you are approved, you provide the cash deposit, which the issuer holds as collateral. That deposit sets your credit limit and remains locked until the account is closed in good standing.

From there, the card works like any other. You make purchases, your available credit is reduced, and you receive a statement at the end of each billing cycle. You must pay at least the minimum balance, and if you carry debt, interest accrues at a variable APR. 

Most secured cards also charge extra fees such as an annual fee, a balance transfer fee, or foreign transaction fees. Importantly, the deposit is not applied to your monthly bill; it is only used if you default on payments.

As you use the card responsibly, your payment history is reported to business credit bureaus, which helps build your company’s credit profile. After demonstrating consistent repayment, some issuers may raise your limit or upgrade you to an unsecured account, at which point your original deposit is refunded. 

Secured cards may include rewards programs, but these are generally basic compared with the cash back rewards or perks available on traditional small business credit cards.

Benefits of a secured business credit card

For entrepreneurs who are just starting or have struggled with personal credit in the past, a secured business credit card can provide some practical advantages:

• Gives small business owners with limited or poor credit history access to a working credit limit

• Creates separation between business expenses and personal spending, which simplifies tax reporting and expense management

• Offers a way to demonstrate creditworthiness through consistent on-time payments, which may open the door to an unsecured business credit card or even a small business loan later on

• Some card offers include basic rewards programs, such as cash back on purchases or statement credit perks that reduce your balance

Secured cards can be a first step toward better financing options, but they are rarely a long-term solution for companies with growing business needs.

Limitations of secured business credit cards

The biggest drawback is the upfront deposit amount. Most issuers require between $500 and $5,000, and that money sits idle as collateral rather than being available for business expenses. 

Even after you’ve tied up cash, the credit limits are usually low, making it difficult to cover larger needs like payroll, inventory, or marketing.

On top of the deposit, many secured card offers include extra costs such as an annual fee, balance transfer fee, or foreign transaction fees. These charges add up quickly, especially when paired with a high variable APR, which makes carrying a balance from one billing cycle to the next particularly expensive.

Rewards programs also tend to be weaker compared to traditional small credit cards. While some secured cards provide cash back rewards or the occasional statement credit, the perks are usually capped or far less competitive than unsecured options.

Perhaps the most concerning limitation is the personal guarantee required by most secured card issuers. If your business fails to make on-time payments, your personal credit score can take a hit, and in some cases, your personal assets may be at risk. 

For many small business owners, this defeats the purpose of trying to separate personal and business finances in the first place.

Because of these limitations, secured business credit cards often function as a temporary bridge rather than a lasting solution. As companies grow, they usually look for alternatives that provide higher credit limits, stronger rewards, and financing options that don’t require locking up cash.

Alternatives to a secured business credit card

For many small business owners, the limitations of a secured business credit card, low limits, tied-up deposits, and high fees create more problems than they solve. 

The good news is that several financing options provide meaningful credit without locking away your working capital. These alternatives each come with their own tradeoffs, but most offer greater flexibility for real business needs.

1 -  Unsecured business credit cards

One common alternative is the unsecured business credit card. Unlike secured cards, these do not require a cash deposit, and they typically provide higher credit limits and stronger rewards programs. Many offer cash back rewards or statement credits, which help reduce business expenses. Approval usually depends on your business credit score or personal credit profile, so companies with limited history may need to demonstrate consistent on-time payments before qualifying.

2 -  Traditional business loans

Another option is a traditional business loan, which provides a lump sum of capital with fixed repayment terms. Loans can be valuable for startup costs, equipment purchases, or long-term investments, but they often require detailed documentation such as tax returns, financial statements, and proof of creditworthiness. Because payments are fixed, loans can put pressure on cash flow if monthly obligations are too high.

3 -  Business lines of credit

A more flexible approach is a business line of credit. This works like a revolving account: you draw funds as needed, repay them, and borrow again. Interest applies only to the amount you use, making it especially useful for seasonal expenses, vendor payments, or unexpected costs that arise during a billing cycle. Many entrepreneurs prefer this model because it provides ongoing access to capital rather than a one-time lump sum.

4 -  Revenue-based financing

Some businesses also turn to revenue-based financing, which ties repayment to sales performance. If revenue slows, your payments decrease, and if sales grow, you pay more quickly. This flexibility helps protect cash flow during leaner months, and it doesn’t require equity or a personal guarantee. For companies with strong online revenue streams, it can be a practical fit.

5 -  Other bank credit products

Finally, established banks such as Bank of America or First National Bank continue to offer a wide range of credit cards and loans. These products can come with lower interest rates and more structured limits, but they often involve slower approval processes, stricter requirements for personal credit scores, and heavier documentation demands.

For startups considering their first credit product, this guide to the best business credit cards breaks down which options align best with different stages of growth.

The right choice depends on your business model and funding goals. What matters most is avoiding products that lock up cash while providing too little flexibility. Secured cards may serve as a starting point, but alternatives like unsecured cards, credit lines, or non-dilutive financing are far better suited for growth.

How Rho compares to secured business credit cards

While secured, these credit cards serve a purpose for those with limited credit history; they fall short for growing companies that need meaningful credit lines. 

That’s where Rho takes a different approach. We don’t issue secured cards at all. Instead, our product is an unsecured corporate card, which means there is no cash deposit or personal guarantee required. This removes two of the biggest barriers entrepreneurs face when applying for financing and frees up working capital for growth.

With Rho, credit limits often reach into the six figures, far above the $500 to $5,000 range most secured cards provide. That level of access allows business owners to cover major expenses like payroll, marketing campaigns, or large vendor payments without worrying about hitting a ceiling.

Every purchase also earns up to 2% cash back, giving companies real savings on everyday business expenses.

Companies can issue employee cards with custom spending controls, track purchases in real time, and connect smoothly with accounting systems. Unlike many secured card offers, Rho cards carry no annual fee, hidden charges, or restrictive terms.

This provides flexibility without the drawbacks of high interest rates, deposits, or legacy terms. You can read more about the application process in our guide on how to apply for a business credit card.

By eliminating the need for a deposit and combining credit access with modern financial tools, Rho gives small business owners a solution that secured cards were never designed to offer.

Why you shouldn’t need a secured business credit card

For many entrepreneurs, the biggest problem is the lost opportunity cost. When you lock away thousands of dollars in a security deposit, that cash can’t be used to hire employees, purchase inventory, or cover marketing campaigns that actually drive growth. 

Even if you maintain a perfect payment history, you’re essentially paying to borrow against your own money.

The low credit limits on secured cards add another layer of frustration. A $2,000 or $3,000 limit may cover office supplies, but it won’t stretch far enough for payroll or larger business expenses. This leaves many small business owners relying on multiple cards or short-term workarounds that complicate cash management.

High variable APR makes the situation worse if you ever carry a balance from one billing cycle to the next. Interest charges quickly eat into margins, making it harder to maintain a healthy cash flow. 

And while building a credit score is important, there are faster ways to establish creditworthiness through products that report to major credit bureaus without requiring a deposit.

Most secured cards also tie back to your personal life. Because issuers often require a personal guarantee, your personal credit score and even your assets are on the line if your business falls behind on payments. 

How Rho helps small businesses access funding

At Rho, we know traditional financing often comes with upfront costs, restrictive credit limits, or high interest rates. That’s why we built a platform designed to give founders more financial flexibility without those burdens.

Rho offers business banking, corporate cards, expense management, and other tools so you can manage cash flow, control spending, and close the books faster. You also get access to rewards like cash back with Rho Platinum. Instead of piecing together tools from multiple providers, you work with one unified platform tailored to your business stage, model, and goals.

Unlike many traditional lenders, we don’t require personal guarantees or hidden fees. Our team stays neutral, helping you compare structures, repayment terms, and tradeoffs so you can make the right decision for your company. 

Whether you’re looking to extend your runway, cover operating expenses, or finance inventory, the focus remains on what works best for your business.

You get the working capital you need, with the confidence that your financing partner is truly in your corner.

If you’re ready to move beyond the limits of a secured business credit card, we can help. With Rho, you get the credit to scale without cash deposits, low limits, or personal guarantees holding you back. 

Get your Rho card today.

FAQs

What is the difference between a secured and an unsecured business credit card?

A secured business credit card requires a cash deposit equal to your credit limit. An unsecured business credit card does not require a deposit, often comes with higher limits, and typically includes stronger rewards programs such as unlimited cash back. You can learn more about the differences in our guide to secured vs. unsecured cards.

Can a secured business credit card help build business credit?

Yes. As long as you make on-time payments, most secured cards report your payment history to major business credit bureaus like Dun & Bradstreet and Equifax. Over time, this can improve your business credit score and help you qualify for other financing options.

Do secured business credit cards require a personal guarantee?

Most card issuers require a personal guarantee, which means your personal credit score and even your personal assets may be affected if the business cannot repay its balance. This is one of the biggest risks of relying on a secured business credit card.

Are there alternatives to secured business credit cards for small business owners?

Absolutely. Small business owners can consider unsecured business credit cards, a business loan, or a business line of credit. For startups, this list of the best business credit cards offers additional perspective.

How do I apply for a business credit card without a personal guarantee?

Some issuers allow you to apply for a business credit card with an EIN only, but approval usually requires strong business financials and an established credit profile. Rho cards stand apart by offering no personal guarantee, higher credit limits, and integrated expense management from day one.