It is difficult to obtain business credit until the business is well established. In most cases, business founders need to invest personal capital (and credit) to qualify for a business line of credit. Entrepreneurs may not want to risk personal credit for their business – or even cannot do so due to bad credit. The Wells Fargo Business Secured Credit Card is one of the few credit card options for small businesses looking to build credit while supplementing their cash flow.
To understand how secured credit cards work, consider that the card issuer requires some form of guarantee that you will pay off your outstanding balance. Most credit cards use a credit score to measure how likely you are to pay your bill. If your credit doesn’t meet the requirements, you must take additional steps to reduce your card issuer’s risk.
Secured credit cards require a refundable cash deposit as security. The amount you deposit usually becomes your line of credit. If you default on your card balance, the card issuer will keep a deposit to cover the unpaid balance. If you manage your secured card responsibly, the card issuer may report positive activity to the credit bureaus and help you rebuild your credit score. You can even increase your unsecured line of credit and get your deposit back. ZDNet’s Wells Fargo Business Secured Credit Card Review provides an in-depth look at the card.
Let’s say your business isn’t established enough to qualify for a business card and you don’t want your personal balance to be impacted by business expenses. If so, a Wells Fargo business card can help your business. A secured business credit card is a great way to build credit for your business, but it has its limitations.
Below is an overview of the card’s pros and cons, features and rewards.
Benefit:
- Build (or restore) your company’s credit history.
- Credit limit up to $25,000
- Ability to upgrade to unsecured credit
- Report payment history to Small Business Financial Exchange
- Choose if you want to earn cash back or reward points
- Redeem online for an extra 10% points
- Use up to 10 employee cards
- This activity will not be reported to consumer credit bureaus to protect your personal credit.
Disadvantages:
- Requires a $500 to $25,000 cash outlay to get a similar line of credit
- No signup bonus available
- Limited business credit card benefits
- It won’t help rebuild your personal credit
- To apply, you must be a customer of a Wells Fargo business bank account.
Am I eligible for a Wells Fargo Commercial Secured Credit Card?
To qualify for the card, you must have a legally registered business. Stage is not that important – your business may be in the early stages of startup or it may have been established for a long time. Wells Fargo Commercial Bank is also required. If you don’t have a Wells Fargo business checking or savings account, you must open one first. Wells Fargo is reviewing your existing banking relationship to make a decision.
How do I apply?
You must apply for the card online, as Wells Fargo no longer accepts in-store applications. You need to provide:
- Legal company name, telephone number and address
- Business Tax ID or Social Security Number
- Wells Fargo Business Account Information
- Type of company
- Number of business owners with at least 25% ownership listed as guarantors
- Your company’s total annual revenue.
You will also be asked to provide personal information such as date of birth, citizenship and social security number. However, Wells Fargo will not retrieve your credit report.
What should I do after the review is passed?
Once you have applied for and approved the card, you will need to transfer an amount from your current Wells Fargo business bank account as collateral for the card’s credit limit. You cannot touch the amount until the card is closed. It can serve as a backup if your business doesn’t pay your credit card bills.
You can apply for up to 10 employee cards and use the Wells Fargo Business Secured Credit Card like any other credit card. Spending wisely and paying on time is important for a number of reasons. Wells Fargo will report your usage to the Small Business Financial Exchange to build a credit history. Additionally, the bank regularly reviews your business account and credit card activity to determine your eligibility for an unsecured business credit card. If you are offered an unsecured credit card, it may take approximately 30 days for your deposit to be received.
How secure is the card?
Wells Fargo protects your account in a number of ways. All cards are equipped with chip technology, which reduces the risk of fraud. The Zero Liability Program will refund any fraudulent fees if you spot unusual activity – just report it immediately. You can set up spending activity alerts to complement Wells Fargo’s fraud monitoring of your business accounts and provide early detection of suspicious activity.
How to contact customer service?
If you need help with the card, you can contact your local branch. Wells Fargo also provides two phone numbers for additional support:
General Inquiries: 1-800-416-8658
Accounting: 1-800-225-5935
Bottom line
Small businesses that are struggling to establish a credit history independent of the owner may find the Wells Fargo Commercial Secured Credit Card beneficial. Use this card strategically; after a period of on-time payments and responsible spending, your business may qualify for an unsecured business credit card.
Will the Wells Fargo Commercial Secured Credit Card help me rebuild my credit?
The card will help you rebuild your business credit, but not your personal credit. Wells Fargo will not use your FICO score to approve your business card. Your payment activity and credit card usage are not reported to credit bureaus. Financial institutions instead report to the Small Business Financial Exchange.
Is there a safe business card replacement if I can’t afford the deposit?
There are several ways to bypass deposits. For example, you can start with a small deposit and a $500 credit limit. Make small purchases and pay your card on time to maintain a strong track record. Over time, you may be eligible for a credit limit increase without paying another security deposit.
Or you can request a business card and use your personal credit score to approve your card. However, every use can affect your personal credit history – even if it’s business in nature.
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