March 15, 2022

Secured vs. unsecured business credit cards: Which is right for you?

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Business credit cards can be a valuable asset. They make it possible to access working capital when the need arises and open the door to rewards and other perks. That is, as long as you our your business have an adequate credit score to qualify for them.

If you don’t meet eligibility requirements for top business credit cards, chances are you’ve come across the term “secured business credit card.” But what exactly are secured credit cards, and how do they differ from unsecured business credit cards? Read on for the answers and to understand the right option for you and your business.    

What is a secured credit card?

A secured credit card is a lending account that’s attached to a plastic spending card, much like traditional credit cards. When you spend money using the credit card, that money is added to your balance and deducted from your available credit. You then have the option to pay the balance off completely or carry the balance month to month, making small payments. If you take the month-to-month route, you’ll pay interest charges as a result.

The key difference between secured and unsecured options is that secured credit cards require a security deposit. For instance, a card with a $500 limit would require a $500 cash deposit from the cardholder. The security deposit you pay becomes your credit limit. That means you’re essentially borrowing from yourself.

Why would you want to do this? Secured credit cards give you a way to show lenders that you and your business are worthy of unsecured options. When you use them properly, they can lead to better credit scores and better lending options in the future.

Pros and cons

As with any financial product, there are some benefits and drawbacks of secured credit cards that you should consider before you open one of these accounts. The most important ones are outlined below.

  • They enable you to improve your credit score if you use your secured credit card properly.
  • Some secured business credit cards come with rewards.
  • Some secured credit cards make it easy to track your business spending.
  • You’re required to place a cash security deposit with the lender.
  • Credit limits are typically low.
  • Secured credit cards usually come with high interest rates and fees.

What is an unsecured credit card?

Unsecured business credit cards are what you think of in terms of traditional business credit cards. These are spending accounts attached to a plastic spending card. As is the case with secured credit cards, when you use them, the money you spend is added to your balance and deducted from your available credit.

The difference is that these credit cards are unsecured, meaning they don’t require a security deposit. Lenders offer these cards to businesses with a positive credit history based on good faith that they’ll pay as agreed.

Pros and cons

Unsecured credit cards come with their own list of pros and cons to consider.

  • You can access spending power with no security deposit.
  • Most unsecured credit cards offer compelling rewards programs.
  • Access higher limits and lower fees compared to secured credit card options.
  • Many unsecured options come with annual fees.
  • You may be required to make a personal guarantee.
  • Unsecured business credit cards can be more difficult to qualify for.

Differences between secured credit cards vs. unsecured credit cards

In summary, some of the biggest differences between secured and unsecured credit cards include:

  • Security deposit: Secured credit cards require a security deposit; unsecured options do not.
  • Credit limit: Unsecured credit cards typically come with a higher credit limit.
  • Rewards and fees: Unsecured credit cards usually come with better rewards and lower fees than their secured counterparts.
  • Accessibility: Secured credit cards are easier to get than unsecured credit cards.

How to choose between secured and unsecured credit cards for businesses

The choice is simple. Unsecured credit cards are typically the better option if you qualify for them. Here's why.

Benefits of unsecured credit cards

  • Rewards: You have to spend money to make money. Why not earn more rewards every time you spend money on your business?
  • Access to capital: Capital restrictions are one of the biggest pains business owners face. Unsecured credit cards give you more access to capital.
  • Spend management software: Advanced options, like Ramp, help you empower your employees with spending cards while maintaining control through spending limits and other card controls. There is a long list of other perks you can access with the right unsecured card.

Build credit with a secured card

If your business doesn’t qualify for an unsecured credit card, use a secured card to build your business credit and open the door to an unsecured credit card down the line. Make sure you follow these best practices to build a great credit history: 

  • Payments: It’s imperative to make your payments on time, every time. It’s also a good idea to pay as much of your balance off as you can each month and avoid making minimum payments.
  • Spending: It’s important to keep your spending in check. Never spend more than 30% of your credit limit, as doing so could harm your credit score.
  • Ask for limit increases: Most lenders won’t automatically increase your limit, but a higher limit could improve your credit score. After you’ve used your card properly for at least six months, call the lender and see if you qualify for a credit limit increase.

Try Ramp's unsecured card

Your choice of business credit card is one of several financial management strategies that can help your business grow. Ramp is an unsecured card that you may be able to get for your business even if you don’t have a long credit history. We offer a charge card, meaning you’ll be able to access the money you need and pay it off every month, avoiding interest and finance fees. We also offer sales-based underwriting which makes it easier for you to qualify for the card even if you don’t have extensive credit history. Our platform also comes with spend management features to help you stay in control of your finances, and you’ll earn 1.5% cashback when you use it. Learn how Ramp can help your business today.

The Ramp team is comprised of subject matter experts who are dedicated to helping businesses of all sizes work smarter and faster.


What's the difference between a secured credit card and an unsecured credit card?

A secured credit card requires a security deposit equal to the amount of the credit limit set for the card. An unsecured credit card does not require a security deposit. 

What are the disadvantages of an unsecured credit card?

Unsecured credit cards have a stricter approval process than secured credit cards. They can also be dangerous for the user because spending limits are higher. Bad credit borrowers will be charged a higher interest rate than good credit borrowers. 

Does Ramp have unsecured credit cards?

Ramp’s cards are unsecured, but they are business charge cards, not credit cards. As part of the underwriting process, Ramp pulls commercial credit bureau information for the business itself, not the owners. Business owners are not required to post a security deposit or submit to a personal credit check to be approved for a Ramp charge card. In addition to commercial credit data, Ramp considers bank balances and financials as a basis for approving businesses

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