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

Learn which one is right for your business.
Secured vs. unsecured business credit cards: Which is right for you?

Are you a small business owner who is looking for a credit card? If so, you may be wondering if you should get an unsecured or secured credit card. Both types of cards have their pros and cons, so it can be tough to decide which one is right for you. In this article, we’ll break down the differences and help you decide which one is best for your small business.

Small business owners often make the mistake of using a personal credit card for business. That’s dangerous because the IRS can deny tax deductions if they look personal, and a personal credit card doesn’t build a business credit rating. If this is your situation, the next step in your company’s evolution is to apply for a business credit card. Read on to learn more.    

What is a secured credit card?

A secured credit card provides small business owners the opportunity to build or rebuild their company credit rating. Unlike unsecured credit cards and loans, these cards allow the user to invest in their own business without borrowing from an outside entity, thus securing their own source of capital rather than relying on someone else to fund operations and expenses.

Secured credit cards are issued by banks or credit card companies. The cardholder is required to make an initial deposit as collateral against their credit limit. For instance, a card with a $500 limit would require a $500 cash deposit from the cardholder. When purchases are made with that card, the user is essentially spending their own money, which they then pay back monthly. 

Credit card companies make their money on secured credit cards by charging interest on outstanding balances, annual fees, and maintenance fees on the account. Business owners can avoid interest charges and build good credit by paying off the full balance each month before the due date. That makes secured cards one of the more cost-effective ways to build business credit or improve poor credit, but spending is limited by the security amount.

What is an unsecured credit card?

While a business credit card is a great financial tool for any company to have, not all business credit cards are created equal. Unlike secured credit cards, unsecured business credit cards don't ask for collateral against your credit limit, which for many businesses makes them the more attractive choice. They also offer higher spending limits and typically offer perks or rewards programs.

Approval for an unsecured credit card may require a personal credit check on the business owner. You can review your credit score with one of the major credit bureaus (Experian, TransUnion, or Equifax) and compare your credit history against the issuer’s credit requirements to determine if you qualify. There may also be an available asset requirement (cash in the bank) if you’re applying for a corporate card with spend management features. Research these requirements carefully before applying for an unsecured business credit card to ensure that you have the best chances of approval.

Unsecured credit card limits are determined by the creditworthiness of the user or the cumulative assets the company has in their bank account. Credit card issuers need to mitigate risk when issuing unsecured cards, so don’t expect high spending limits with a low credit score or limited funds in the bank. Your limit will increase as you improve in those areas.

Unsecured vs secured credit cards 

For your convenience, we’ve compiled a list of pros and cons, along with some suggested use cases, for both unsecured and secured credit cards. This is an important decision for a small business owner, so weigh these two options carefully. There are arguments in favor and against each of these funding options that could affect how you run your business.  

Unsecured business credit cards

Small business owners who would like to maintain some control over their spending should consider an unsecured credit card to have access to a line of credit when needed. These types of cards typically have lower interest rates than secured cards, but interest rates may be higher for applicants with less than excellent credit. Here are some pros and cons: 


  • No security deposit
  • Stricter approval standards
  • Higher spending limit


  • Potential for overspending
  • Rewards programs
  • Higher interest for applicants with bad credit


Unsecured cards are preferred by most small business owners because there’s no security deposit required, and there is a higher credit limit. Unsecured cards also come with rewards programs, like cash-back, air miles, and merchandise credits. On the downside, they are more difficult to get approved for, can be abused because of higher spending limits, and come with a higher interest rate for bad credit borrowers. In some cases, the rewards programs can cause cardholders to overspend, racking up points they may never use.


Secured business credit cards 


As an alternative, small business owners who would like to build their business credit should consider applying for a secured card to begin establishing themselves as reliable credit users. These types of cards are ideal for borrowers with limited established credit because the approval process is less stringent. Here are some of the pros and cons of secured cards:



  • Easy application process
  • Limited spending power
  • Spending limit set by security amount


  • Security deposit required
  • Credit building  
  • High fees and maintenance charges

The application process for a secured business credit card is easy, and making monthly payments on time will build credit, but the spending limit imposed by the security deposit can be a benefit and a detriment at the same time. It’s a spend control feature that limits spending power. There are also high monthly fees and maintenance charges with secured cards.


Which is better for your business?


Secured credit cards certainly have a place in the business world, but generally, small business owners prefer to go with unsecured credit cards or business charge cards. The charge card vs credit card debate puts charge cards in the same category as unsecured credit cards, but there are some significant differences. We’ll go over those in more detail below. 


Unsecured credit cards often have rewards programs. How do credit card rewards programs work for small businesses? Those air miles, cash back programs, and free hotel rooms can all be assets for a company looking to minimize expenses. They could also be used as incentives for employees or a well-deserved vacation for the owner (that’s you).


Finally, lenders that issue unsecured credit cards may also offer virtual cards for business. These function the same as traditional plastic, but they’re digital. Business owners can use them to tighten up spend control and prevent credit card fraud. Users can access them via a mobile device, and they’re virtually impossible to steal. Though already popular, look for them to gain additional traction as the world becomes more comfortable with digital assets.       

4 benefits of unsecured credit cards for businesses

We’ve already discussed several benefits of using unsecured credit cards for your business. For review purposes, here’s a summary of the points we covered in the previous sections:

  • No security deposit: Secured credit cards require a security deposit. For a small business owner, that’s putting up money that could be used for operations or expansion. Unsecured credit cards don’t need a security deposit, so your spending power immediately goes up when you’re approved.  
  • Higher spending limits: Unsecured credit cards come with spending limits that are not restricted by the amount of a security deposit. This gives a business more flexibility to make purchases and cover expenses, even when they’re unexpected.  
  • Rewards programs: Credit card rewards programs can be used to incentivize employees, lower costs, or reward yourself with a much-needed vacation once they’ve accumulated. Secured credit cards don’t come with rewards programs.  
  • Virtual cards: Traditional plastic credit cards are often lost or stolen. Virtual credit cards are in a digital format, making them almost impossible to lose or steal. This is a safer way to do business that is becoming more popular every day. 


These are some of the more obvious benefits of unsecured credit cards, but certainly not the only ones. In the next section, we’ll cover the credit building power of unsecured cards. This is particularly important if you’re shopping for business credit cards for startups. Those early days are the best time to start building company credit. Read on to learn how.  

Which types of credit cards affect personal credit? 

One of the more common questions asked on this topic is, “Does a business credit card affect personal credit?” The answer is dependent upon the type of business credit card you choose to use. In this section, we’ve broken the answer down by types of cards. Our categories include unsecured credit cards and business charge cards.

1. Unsecured credit cards

Yes, approval for an unsecured credit card might also require a personal credit check, but the card can be issued to the business and on-time payments will help build the business credit rating with agencies like Dun & Bradstreet that track that type of thing. As an added bonus, the primary on the card could also get a boost on their personal credit score. 

2. Business charge cards

One of the best ways to build business credit is by using a business charge card. They have no effect on personal credit scores because charge card issuers don’t do personal credit checks. Their approval criteria are based on company assets, not personal credit scores. Payments and purchase history will help boost the company’s credit rating.     

How Ramp’s spend management software helps businesses grow

Your choice of business credit card is one of several financial management strategies that can help your business grow. Aside from the obvious cost factors involved, like interest and fees, the right card can help you control and track spending. That’s critical for long-term success, so business owners should look for the following features:

  • Charge cards: Charge cards are issued and controlled by the company, not a credit card issuer. Employees can use them for business-related purchases and expenses.
  • Spend control: Setting automated spend controls for company-issued charge cards is more effective for controlling spending than simply writing an expense policy. 
  • Expense tracking: Cards created specifically for business spending have better tracking mechanisms in place than personal credit cards. 
  • Real-time reporting: Seeing expenses in real time rather than waiting for a monthly statement gives you the ability to make changes on the fly. 
  • Accounting automation: Expense categories are an area where errors are common. A system that can automate expense categories eliminates that possibility.  
  • Software integrations: Credit cards and charge cards should be connected to your accounting software. Look for a system that offers that.  

Ramp offers all these features and more. Our charge cards are unsecured, so the approval process is based on company assets, not personal credit scores. Using Ramp Visa charge cards is an effective way to improve your company’s credit rating. They’re also a great tool to manage and grow your business. Visit to learn more.