Everything You Need To Know About Secured Business Credit Cards

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If you’ve been comparing business credit cards online, there’s a decent chance you’ve come across some secured cards. If you aren’t sure what “secured” means or how to compare secured cards to other business credit cards, we’re here to help.

Read on for everything you need to know about secured business credit cards.

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You Won’t Want A Secured Card Unless You Need One

There may be a few rare cases where this is untrue, but for the most part, a secured credit card is a good option only when unsecured credit cards are unavailable to you.

Secured business credit cards do offer rewards similar to many of their unsecured counterparts. At the same time, your selection of cards will be limited. Not only that, but your interest rates will probably be higher than they would be with a similar unsecured card.

What Makes A Card Secured?

Have you ever lent yourself money? The concept sounds kind of absurd, and in a way it is.

Secured credit cards require you to put down a security deposit when you sign up for them. The bank will then use that security deposit to establish your credit limit. So if you put $200 down, you’ll have a $200 credit limit. If you’re lucky, the bank will apply a small multiplier to your deposit.

Why would you do that? If it helps, you can think of it as a strategic money transfer between your different accounts that maximizes the efficiency of your money.

How Secured Cards Can Help

Secured credit cards are a way for business owners who have recently filed bankruptcies to access revolving lines of credit. Many of these individuals may find it difficult to be approved for an unsecured business credit card.

The security deposit removes the risk from the bank, and the cardholder is able to access rewards and perks similar to those they would get with unsecured business credit cards.

More importantly, a secured business credit card becomes an easy way to repair your credit. Just be aware that banks aren’t always consistent about how they report business credit card activity. Some will report to a consumer credit bureau. Some will report to business credit bureaus. Some will report to both. Some will report to neither. Be sure to find out before you sign up.

How You Should Use A Secured Credit Card

Secured business credit cards usually have very low credit limits, so it’s difficult to get yourself into too much trouble by using them. That said, you should use your secured card judiciously, avoiding spending more in a month than you can pay off that month.

As for what you should spend it on, that depends on the type of card you get. Some cards return a small amount of cashback for every purchase you make. Others use a multi-tiered system that might reward telecommunication expenses at 3 points per dollar and general expenses at 1 point per dollar. You’ll get a better return on your investment if you use the card for purchases that maximize your reward points or cash back.

What Are The Drawbacks?

For starters, secured business credit cards come with all the same risks of unsecured business credit cards. Business credit cards aren’t governed by the same regulations that consumer credit cards are. That means you’ll need to be on guard for surprise rate changes, floating due dates, and fast and loose terms of service.

Secured credit cards come with a few additional risks, however. The big one is higher interest rates. If you pay off your card’s balance every month, you don’t have to give interest rates too much thought (just watch out for that aforementioned floating due date). That said, if you can avoid getting charged usurous fees if you miss a payment, you should. With a little research, you should be able to get a secured credit card with a reasonable APR.

The other things to look out for are miscellaneous fees. It’s not unusual for even unsecured business credit cards to carry annual fees, but secured business cards can come with even more charges, including application fees, maintenance fees, and processing fees. Avoid as many of these as you can.

How Long Should You Have A Secured Business Credit Card?

The answer is, of course, no longer than you need to. You should expect to have to use a secured business credit card for about a year. After that, a bank will usually offer you an unsecured credit card.

In the event that the issuing bank doesn’t offer you a new card, don’t be afraid to ask to be promoted to an unsecured card.

At that point, you should have your security deposit returned to you. Unfortunately, you don’t usually earn interest on your deposit.

Final Thoughts

A secured business credit card should primarily be viewed as a road back to decent credit health. Remember, however, that it isn’t necessarily the best or only path you can take. Some banks also offer high-interest, low-limit unsecured credit cards to customers with poor credit. Avoid offers that pile on the fees, and you should be back to normal unsecured credit card usage in no time.

Looking for a good unsecured card instead? Check out our 2018 business credit card guide.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

How To Reconcile A Bank Account In QuickBooks Pro

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How To Reconcile A Bank Account in QuickBooks Pro

One of the most important processes in accounting is bank reconciliation: ensuring that the transactions you record in QuickBooks match the activity in your bank.

Reconciling a bank account may sound intimidating, but we’ve broken the process up into 12 manageable steps.

Let’s get started.

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Reconcile A Bank Account

Before you reconcile your bank account, make sure your QuickBooks account is up to date. If you have any last minute payments to enter or deposits to record, be sure to do so.

Once all of the transactions in QuickBooks are up to date, grab your bank statement and keep it in front of you — you’re going to need it. Then go to your home screen and click on the “Reconcile” option.

How To Reconcile A Bank Account in QuickBooks Pro

You’ll be taken to a screen that looks like this:

How To Reconcile A Bank Account in QuickBooks Pro

Step 1: Choose Account

To start, select the account you are reconciling. For our sample company, we are reconciling our checking account.

How To Reconcile A Bank Account in QuickBooks Pro

Step 2: Modify Statement Date

Find the statement date on your bank statement (it’s usually the last day of the month and can most often be found on the top of the statement). Then use the drop-down calendar to enter this date into QuickBooks.

How To Reconcile A Bank Account in QuickBooks Pro

Step 3: Verify Beginning Balance

You’ll want to double check that the beginning balance in QuickBooks matches the beginning balance on your bank statement.

How To Reconcile A Bank Account In QuickBooks Pro

If your beginning balance doesn’t match, click on the blue “What if my beginning balance doesn’t match my statement link?” or watch this QuickBooks Pro reconciliation video.

Step 4: Enter Ending Balance

Enter the closing balance on your bank statement into QuickBooks Pro.

How To Reconcile A Bank Account In QuickBooks Pro

Step 5: Add Any Service Charges

If you see any service charges on your bank statement, add the total at this time. Make sure to adjust the date and tell QuickBooks which expense account you want bank service fees to be recorded in.

How To Reconcile A Bank Account In QuickBooks Pro

Step 6: Add Any Interest Earned

If you received any interest payments from your bank on your statement, add the total at this time. Adjust the date and tell QuickBooks which income account you want to record earned interest in.

How To Reconcile A Bank Account In QuickBooks Pro

Step 7: Click Continue

Once all the information on the screen is correct, click the blue “Continue” button.

How To Reconcile A Bank Account In QuickBooks Pro

You’ll be taken to the bank reconciliation screen, which looks like this:

How To Reconcile A Bank Statement In QuickBooks Pro

The Reconciliation Screen Explained:

Let me break down this screen a little bit.

At the top of the screen, you’ll see the period date. You’ll also see an option to “Hide transactions after the statement’s end date.” Clicking this means that only the transactions from this statement period and earlier will be shown. (I recommend checking this box if you have a lot of transactions that come after your statement date.)

The screen is then divided into withdrawals and deposits, just like your bank statement. On the left side of the screen, you’ll see “Checks and Payments,” or withdrawals. On the right side, you’ll see “Deposits and Other Credits.”

On the bottom of the screen, you’ll see the beginning balance, the number of items cleared (which is currently zero), and a few other totals. The main total you want to pay attention to is the “Difference” total. Currently, our difference total reads 5,171.07. By the end of the bank reconciliation process, this number should read 0.00.

Step 8: Match Transactions

Now, to actually reconcile your account, you are going to match the transactions from your bank account with the transaction in QuickBooks. Don’t worry — it’s simpler than it sounds.

Here’s our sample bank statement:

How To Reconcile A Bank Statement In QuickBooks Pro

We’re going to go straight down the list to make things easy. On our sample bank statement, the first transaction is a withdrawal of $1,400 paid to Shire Views Property Management. Now we have to go back to QuickBooks and find this transaction.

We go the Checks and Payments section for withdrawals and look for a matching transaction. In this case, it’s the top transaction (see picture below). Once you find the transaction, make sure the amount in QuickBooks matches the exact amount on your bank statement. Then click the checkbox next to the proper transaction.

How To Reconcile A Bank Account In QuickBooks Pro

Tip: Printing your bank statement and marking the transactions on it as well can help you verify transactions and not get lost.

Let’s do another example.

You’ll see that the second transaction is for a withdrawal. (We ordered $655 worth of inventory from Gimli at Moria Mining on 11/1.) The first step is to go to our QuickBooks screen — on the Checks and Payments side — and look for the matching transaction.

On 11/1/2017 a check for $655 was written to Gimli. The two amounts match, so we check the box.

How To Reconcile A Bank Statement In QuickBooks Pro

Continue matching transactions until you’ve matched every transaction in your bank statement.

Tip: While the amounts must always match, the dates on your bank statement may differ from the dates in your QuickBooks account. For example, you may write a check on the 5th that doesn’t get cashed and processed by the bank until the 10th. The same transaction will be dated 11/5 on QuickBooks and 11/10 on your bank statement — that’s totally fine.

Step 9: Double Check Information

When all of your transactions are added, your screen should look something like this:

How To Reconcile A Bank Account In QuickBooks Pro

Double check that all of the information looks correct.

If you look at the picture closely, you’ll see that there are three unchecked transactions in the picture above. Not every transaction will be checked. In this instance, we wrote three checks on the last day of the month. None of these checks have been cashed yet, so they don’t appear on our bank statement. We will reconcile these three transactions next month once the checks have been cashed and processed by our bank.

Only check the transactions that appear on your bank statement.

Step 10: Make Sure The Difference Is 0.00

If you did everything correctly, the “Difference” on the bottom of the screen should say 0.00.

If the difference is off (even by a couple of cents), check your QuickBooks transactions and bank statement again to see if there are any discrepancies, If you really can’t figure it out, refer to QuickBooks’ bank reconciliation troubleshooting page to learn about some common reasons why the bank reconciliation process may not be balancing properly

At this point, also check that the withdrawal and deposit total on the bottom left-hand side of the screen matches the totals on your bank statement

How To Reconcile A Bank Account In QuickBooks Pro

Step 11: Reconcile

Once the “Difference” reads 0.00, click the “Reconcile Now” button. Now your account is officially balanced!

How To Reconcile A Bank Account In QuickBooks Pro

After clicking “Reconcile Now,” you may receive a notification from QuickBooks advertising online banking. Click “OK.”

How To Reconcile A Bank Account In QuickBooks Pro

Step 12: Print Reconciliation Records

At this point, you can print the complete bank reconciliation report for your records. You can choose a basic summary report, detailed report, or both. Use the “Display” button to preview these reports before printing.

How To Reconcile A Bank Account In QuickBooks Pro

Repeat steps 1-12 for all bank and credit cards accounts. Most CPAs recommend reconciling your statements each month so you don’t miss any crucial discrepancies.

For troubleshooting issues, check out the QuickBooks Community or call QuickBooks directly. If you have any further questions, leave a comment below and we’ll do our best to help you.

Chelsea Krause

Chelsea Krause is a writer, avid reader, and researcher. In addition to loving writing, she became interested in accounting software because of her constant desire to learn something new and understand how things work. When she’s not working or daydreaming about her newest story, she can be found drinking obscene amounts of coffee, reading anything written by C.S. Lewis or Ray Bradbury, kayaking and hiking, or watching The X-Files with her husband.

Chelsea Krause

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Who Is Responsible For Business Credit Card Debt?

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Business credit cards are a useful way for anyone in your organization to make purchases, all while earning reward points. But while swiping the card may be easy, it raises questions about who is ultimately responsible for the purchases made with the card. The swiper? The business owner? The business itself?

If you’re confused about who is responsible for business credit card debt, read on.

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The Personal Guarantee

In most cases, it’s pretty easy to figure out who is ultimately responsible for business credit card debt. Typically, a credit card company will require the business owner to sign a personal guarantee.

What this means is that, even though the business credit card is technically taken out in the name of your business, the creditor can try to collect on you, personally. This bypasses some of the protections granted to your personal assets by your business’s corporate status.

If you’re worried about creditors knocking on your door after they’ve squeezed all the blood from your business, you may want to think twice before signing a personal guarantee–and scrutinize the ones you do sign.

Personal guarantees come in limited and unlimited forms. An unlimited guarantee is a great deal for your creditor. Under that agreement, you can be held responsible not only for your debt, but for any legal fees associated with collecting that debt. As you might guess, signing an unlimited guarantee is far from ideal.

Limited guarantees come in a couple different forms, but in most cases they assign liability between multiple parties. You’re most likely to see this arrangement if you have business partners, but it’s possible, at least in theory, to negotiate an unlimited guarantee down to a limited one.

Does That Mean The Owner Is Always Personally Responsible?

While a personal guarantee sounds pretty straightforward, in practice it’s far from an air-tight contract.

A side effect of pushing the responsibility onto the business owner is that it can make the debt subject to personal bankruptcy protections. In those cases, your business credit card debt is treated like personal debt.

Even if you don’t declare bankruptcy, a personal guarantee doesn’t necessarily entitle the creditor to declare open season on all your property. To collect anything, they’ll need a legal judgment against you. Depending on your balance, your creditor may decide your debt isn’t worth the trouble.

Is There A Way To Avoid A Personal Guarantee?

You might be noticing a theme so far: there are few certainties in the world of business credit cards. And what do you know? It applies here as well.

The default terms for almost all business credit cards include a personal guarantee, so it won’t be a matter of hunting down a rare, plastic unicorn. On the other hand, banks are more inclined toward negotiation with established customers. You stand the best chance of having a personal guarantee waived if you’re applying for a business credit card from a bank with whom you’ve previously had a relationship.

Bigger businesses and corporations may also be able to use the heft of their enormous accounts to negotiate better business credit card terms with their bank.

Who Is Responsible If You Avoid A Personal Guarantee?

If you circumvent the personal guarantee, your liability for unpaid debt will depend on the way your business is organized. That means limited liability corporations (LLCs), C-corps, and S-corps will, in most cases, have the protection from personal liability that you normally enjoy.

Final Thoughts

Business credit cards come with personal risks. Be sure to understand what your liability is and which assets will be exposed should you default. And, if you can, negotiate a deal that will leave you as protected as possible.

Looking to compare business cards? Check out our 2018 business credit card breakdown.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

What Are The Risks Of Using Business Credit Cards?

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Business credit cards offer a variety of enticing perks to companies that use them skillfully. But with those tempting rewards come a unique battery of risks that can catch unprepared businesses off guard.

Here are some of the risks that come with using business credit cards…

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Interest Rates

The most obvious risk you take when using business credit cards is accruing interest.

Business credit card APRs typically fall in the mid-to-high teens. If you carry a monthly balance on your business credit card, interest will begin to accrue on your account. This interest is an additional, and often unnecessary, business expense.

To figure out how much you’ll be spending in interest, divide your APR by 365. So, if your APR is 18 percent, your daily interest rate will be 0.0493 percent. In other words, if your balance on a given day is $1,000, you’ll accrue 49 cents in interest on that day.

As you can imagine, those small charges add up very quickly. Most carriers will offer a grace period to make payments without being charged interest, but you’ll need to keep an eye on your bill to see if you’re meeting them. Unlike personal credit cards, there’s no set, legally enforced interest-free window.

Bait & Switches

Personal credit cards are governed by the Credit CARD Act of 2009. This legislation ensures that cardholders get 21 days to pay their bills, won’t be subject to retroactive rate increases, will receive ample warning before rates are increased, and will have payments applied to their highest APR items first.

Unfortunately, those protections do not apply to business credit cards. That means credit card companies can change your rate, and even your billing date, with little warning. In a worse case scenario, this can leave you facing charges you aren’t prepared for or make it more burdensome to pay off standing debts.

This doesn’t necessarily mean your credit card company will be pulling shenanigans with your account, but you need to be on guard for it. Be especially wary of changes if you miss a payment, as they’ll often be used as a rationale for tinkering with your terms of service.

You’ll also want to be aware of less nefarious tactics like introductory offers. You may be expecting them to expire, but did you know your credit card company can revoke them at any time, for any reason?

Needless to say, keep an eye on your statements.

Affect On Your Credit Report

At this point, business credit cards are probably sounding like the wild frontier of revolving lines of credits. Unsurprisingly, this can carry over to credit reporting.

There’s no industry standard governing what bureaus your credit card activity is reported to, or if it’ll be reported at all.

This means that some companies will report your business credit card activity to commercial credit bureaus. Others will report it to consumer credit bureaus. Some will report it to both. Some will report it to neither.

So if you’re hoping to create a partition between your personal and business credit, you may have a hard time doing it with a business credit card. This can also make it difficult for you to use a business credit card to repair your personal credit.

If you’re concerned about how your business credit card usage shows up on credit reports, be sure to contact your credit card company and find out what their policy is.

Debt Responsibility

Depending on how your business is incorporated, you may or may not be personally liable for business debts in general.

Business credit cards, however, tend to require a personal guarantor on the account. That means that you are responsible for those debts should your business close. On the other hand, that also means you can treat that business debt as personal debt if you file for bankruptcy.

Final Thoughts

Keep in mind that these risks are a collection of worst case scenarios. Many companies maintain mutually beneficial relationships with their business credit card providers. Nevertheless, it is a poorly regulated segment of the credit card industry that comes with a number of dangerous pitfalls. Just don’t be caught unawares.

Looking for a convenient rundown of some of the most popular business cards? Check out our comparison chart.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

Business Credit Card Rewards: Everything You Need To Know

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One of the biggest perks offered by business credit cards, other than convenience, is rewards. Gamed correctly, business credit card rewards can be a way to save money on your biggest expenses.

Not sure which rewards are right for your business? Wondering what kinds of expenses to use your card on? Not even sure what’s out there? Read on!

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What Are Business Credit Card Rewards?

Simply put, they’re incentives to use your card to make purchases. When you make a purchase on your card, you’ll be awarded points or cash for each dollar you’ve spent. The number and type of points awarded vary by card. In many cases, where you’re spending it matters too.

How Many Types Of Rewards Are There?

A lot. In fact, many business credit card rewards cater to a specific type of spending. Overall, you can break them down into two broad categories.

  • Cash: This is the simplest, and oldest, kind of reward program offered by business credit cards. Cash rewards accumulate as you make purchases on your credit card. You may, for example, earn 2 percent back on every purchase you make. Depending on your carrier, you’ll have the option to redeem the rewards automatically at specific times of year, when you reach reward thresholds, or when you request them. Cash rewards can be redeemed as checks, statement credit and, in some cases, as gift certificates.
  • Rewards: Other business credit cards don’t return cash, instead awarding points or frequent flyer miles to cardholders. These cards tend to cater to specific types of business. For example, businesses whose staff frequently travel may choose a card that awards flyer miles. A business that spends a lot on telecommunications, on the other hand, may choose a card that rewards expenditures on those expenses. Other reward programs are more general, presenting you with a diverse (but limited) array of rewards to spend your points on.

What Are Reward Tiers?

Not all business credit cards have reward tiers. Cash cards almost never have them, for example, but many reward cards do.

Reward-based cards use tiers to influence your spending habits. For example, the Chase Ink Business Preferred Credit card breaks its reward point system into two tiers. For each $1 you spend on travel, shipping purchases, telecommunications, and social media advertising, you’ll earn three reward points. Any other purchases you make will be compensated with one point per $1.

Most cards that use tiers will have two or three of them. The lowest tier almost always represents miscellaneous purchases.

How To Choose The Right Reward

Business credit cards, ideally, reward a specific kind of spending behavior. With that in mind, it’s best to consider which rewards best sync up with your expenses.

This means you’ll probably want to itemize your monthly business expenses to see where you’re spending your money. You’ll also want to get the cash value of the reward points offered by any rewards cards you are considering (expect a value somewhere around a cent or two).

To make a comparison, pretend you’ve put all of your monthly expenses on the credit card and calculate the cash value of the points (or cash back) you would get for making those purchases. So if you have $800 of expenses that qualify top tier points (3) and $1,000 of miscellaneous purchases, you’d be earning $34 worth of rewards each month or $408 per year.

If your expenses aren’t concentrated in any specific area, consider cash rewards. You may not get as big a multiplier on specific purchases, but you’ll often recoup a better value on your miscellaneous purchases. Not only that, but you can spend your cash return on whatever you want. Consider cash as “breadth” to rewards’ “depth.”

What Else Should You Factor Into Your Reward Calculations?

You didn’t think it would be quite that easy, did you? Business credit card terms feature a large number of asterisks and footnotes. Here are some things you should also consider when calculating a card’s reward potential:

  • Sign-up Bonus: Many business credit cards will offer an initial sign-up bonus. This is a one-time offer and usually requires you to spend a minimum amount of money in order to qualify.
  • Annual Fee: Some business credit cards charge an annual fee to keep the card active. You’ll want to deduct this amount from your yearly reward value. Note that many cards will waive the first year’s fee.
  • Reward Limits: While it might be fun to think of ways to earn an endless torrent of reward points, your carrier is one step ahead of you. Some carriers will limit the number of top tier points you can earn. Others may stop rewarding points or cash for the year after you hit a spending threshold of, say, $150,000.

Final Thoughts

Remember that your business credit card should match your existing spending habits. Don’t fall into the trap of thinking you should have a specific card just because it’s popular or even well-reviewed.

Need help getting started? Check out our 2018 business credit card comparisons.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

The Dos And Don’ts Of Business Credit Cards

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Business credit cards offer one of the most convenient ways for your company to borrow money for goods and services without having to have your purchases scrutinized by a lending institution. Best of all, the revolving credit offered by your card means that as long as you pay off your card on a regular basis, you will always have access to a certain amount of money.

But like all forms of debt, business credit cards have downsides and come with fine print that can leave an unprepared business spending far more money than they should. Below, we’ll explore some of the do’s and don’ts of business credit cards.

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DO

Be Aware Of Terms & Fees

Credit cards come with a lot of fine print detailing everything from introductory APRs to how your reward points are calculated. The more transparent carriers will take pains to make you aware of the important details, but beware of asterisks lurking near numbers. Business credit cards don’t have as many protections as personal credit cards, so you’ll want to know if (and when) your carrier can raise your interest rates.

Choose The Type Of Rewards That Best Suit Your Business

Perks are a big part of what distinguishes one business card from another. With some rare exceptions, perks fall into one of three categories:

  • Money Back: For every x amount of money you spend on your credit card, you’ll get a percentage of the expenditures back as cash. Depending on the carrier, this money may be returned as a check, a bank deposit, a gift card, or credit to your account.
  • Rewards: This is a catch-all for a number of different reward schemes, where you’re credited x number of points for each dollar you’ve spent. These rewards can be redeemed for goods and services from selected vendors.
  • Mileage: If you do a lot of long-distance traveling, some business credit cards use frequent flyer miles as rewards. As with the other types of rewards, you’ll earn x number of miles for each dollar you spent.

Be Aware Of Reward Tiers

As important as selecting the right reward type for your business is understanding how to maximize your rewards. Rewards are usually broken up into two or three tiers (although some don’t have tiers). In most cases, the tiers correspond to the multiplier applied to each dollar you spend. You may, for example, earn 3 points per dollar you spend at restaurants, 2 points per dollar you spend at gas stations, and 1 point for each dollar you spend on other purchases.

Ideally, you’ll want to use your card for purchases that earn you the most reward points.

Calculate The Earning Potential Of Your Card

An easy way to figure out which card is best for you is to break down your monthly credit spending into categories like travel, telecommunications, and office equipment. You can then choose a card that will give you the biggest return on your expenses.

Create A Credit Card Policy If Your Employees Will Be Using It

Since business credit cards are for business expenses, the owner isn’t necessarily the only person who will be using it. You’ll want your employees to be aware of how and when to use the card, and how to maximize its value.

DON’T

Pay Too Much In Annual Fees

One of the easiest business credit card fees to avoid is the annual fee. Unlike most personal credit cards, business credit cards frequently require a yearly fee to keep active. These fees usually range from ten to a few hundred dollars. Many cards will waive the first year’s fees, so make sure you know what you’ll be paying over the long term.

Leave Balances On Your Card Longer Than You Have To

You can file this under general credit card advice, but it’s worth remembering: the longer the cost of an item remains on your credit card, the more that item effectively costs. Why would you pay a higher price than you have to? And best of all, you’re still earning rewards!

Use Your Card Recklessly Just To Earn Rewards

As nice as the rewards are, they can be a trap if you adopt the wrong mindset. Running up unmanageable balances in the hopes of maximizing your rewards points will leave you with a net loss.

Use Your Business Card For Personal Expenses

You won’t get in trouble for it, but it’s a best practice to avoid mixing personal and business expenses. At best, it’ll complicate your bookkeeping. If you’re running a small sole proprietorship with minimal expenses, you may want to just use your personal credit card.

Ignore Prerequisites For Sign-Up Bonuses

Many business credit cards offer sign-up bonuses. In most cases, you’ll need to spend a minimal amount of money before those sign-up bonuses kick in. Factor them into your calculations.

Final Thoughts

A business credit card can be a powerful tool for your business. For a side-by-side comparison of popular cards, check out our 2018 business credit card feature.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

What Is A Secured Business Credit Card?

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Conventional wisdom dictates that you’ll have a difficult time accessing credit — including business credit cards — after declaring a bankruptcy (or if your credit score is terrible). But as true as that can be, it doesn’t take into account the credit cards of last resort: secured business credit cards.

Below, we’ll take a look at what secured business credit cards are, where you can find them, and what they offer.

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How Is A Credit Card “Secured?”

The justification for secured credit cards is simple, actually. These cards address a very specific conundrum: banks can’t afford to extend risky borrowers a line of credit, but businesses often can’t rebuild their credit scores unless they have access to a line of credit.

How do you get around this Catch-22? The answer is counterintuitive.

To obtain a secured credit card, you must first give the bank a sum of money that becomes your credit line. If you make a deposit of $300, the bank will extend you a credit line of $300. That deposit secures your credit card. In some cases, the issuer won’t even check your credit (or if they do, it’s only to confirm your identity).

Simple, right? But wait …

Why Wouldn’t I Just Spend The Cash Directly?

That’s the question, isn’t it? On the surface, giving a bank money to lend back to you at interest seems like a pretty bad idea. In fact, it sounds like a completely insane idea.

Luckily, it isn’t quite as bad as it sounds. If you’re able to keep up with your payments, that deposit is eventually returned to you. In some cases, you may be automatically upgraded to an unsecured card when your credit improves (but not always, so keep an eye on your credit rating).

Even before that happens, there are a few perks that can come with secured credit cards. In some cases, the creditor may extend you a credit line equal to your deposit, plus a percentage of your deposit. So you might deposit $300 and have a credit limit of $330.

And again, the only legitimate reason to ever use a secured card is to rebuild your credit.

Does A Secured Card Function Like Other Business Credit Cards?

Yes. In most cases, secured business cards will offer familiar perks and bonuses. You should be able to find cards that offer cash back or reward points.

And once you set it up, you can use it just like a normal business credit card.

What’s The Difference Between A Good Secured Credit Card And A Bad One?

Short answer: fees and interest rates.

The less scrupulous secured credit cards providers know that you probably have poor credit and will try to take advantage of your lack of options.

If possible, you want to select a card that has a low annual fee or no fee at all. These fees are common even with unsecured business credit cards, but they can end up being quite high. Be especially wary of annual fees over $40.

While APRs on secured cards are often higher, there are secured credit cards with rates in the single digits. On the high end, however, are APRs over 30 percent. You’ll want to stay away from those. If you don’t plan on carrying a balance, this isn’t as big a deal, but you should still avoid high rates if you can. Emergencies happen, after all.

Are Secured Cards My Only Option If I Have Bad Credit?

Not necessarily. A lot of banks will offer high-interest unsecured credit cards with very low credit lines to businesses and individuals with poor credit. Depending on the APRs and credit limits, they may or may not offer you a better deal than you’d get with an unsecured card.

Final Thoughts

Traditional lending and credit may still be hard to come by, but for almost any type of credit you can think of, there’s an alternative available for high-risk borrowers. If you do your due diligence, you can use secured credit cards to your advantage. But once your credit is rebuilt, you’ll want to ditch them for an unsecured card.

Not sure where to start with business credit cards? Check out our some of our favorites.

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

What Is Affirm And What Does It Offer?

Our unbiased reviews and content are supported in part by affiliate partnerships. Learn more.

We often talk about how tightening credit standards have changed the face of lending. What’s less discussed is the effect the Great Recession has had on consumers

American credit card debt, currently amounting to around $808 billion, is one of the easiest types of credit to overextend yourself on. Not coincidentally, many younger Americans are avoiding credit cards at a higher rate. Fewer than one-in-three Millenials claim to have a credit card, for example.

That’s where Affirm comes in. Companies like Affirm count on the fact that cardless consumers will still face situations where they need to buy something that they can’t afford.

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How Does Affirm Work?

Affirm offers point-of-sale (POS) financing. This isn’t a new form of lending, but rather a technology-assisted reinvention of an old lending model.

Here’s an example of how the process works:

You decide you can’t possibly live without the hottest new gaming console a moment longer, so you add it to your online shopping cart and proceed to checkout. Among your options to pay are the usual credit and debit cards, along with payment processors like PayPal. But this merchant also provides an option to use Affirm, which allows you to take out a short-term loan on the spot to finance the exact cost of your purchase. You’re given the choice of paying back the loan over the course of three, six, or 12 months. Affirm then shows you how much money you’ll be paying back, expressed as both an interest rate and a dollar amount. If you accept, your purchase is processed.

Congratulations, you’re the proud owner of a new game console…and a short-term loan!

Isn’t That Just How A Credit Card Works?

In a sense, sure. Revolving lines of credit and short-term loans have a lot in common. In both cases, you’re “taking out” an amount of money equal to the cost of your purchase, which you’ll be paying back (hopefully) within the next few months. Additionally, in both cases, creditors aren’t concerned with what you’re buying, just the amount you’re requesting/using.

But there are some important differences.

The big one is that Affirm evaluates each loan separately rather than as a line of credit. You won’t be cut off when you hit a specified credit limit, but your loan may be denied if you missed payments on other Affirm loans or if they believe you’ve overextended yourself. Additionally, Affirm may not always cover the entirety of your purchase; you may have to make a downpayment.

You can expect APRs between 10% – 30% with Affirm. The average credit card APR is around 15%, so you can easily end up paying more than you would with a credit card. Loans are capped at $10,000.

Why Would I Want To Use Affirm Instead Of A Credit Card?

The short answer is that it’s mostly a matter of your own spending psychology, but there are some specific reasons why you might choose a POS loan over a credit card purchase.

You Have Poor Credit

Credit card companies aren’t quite as conservative as they were during the financial crisis, but many shoppers may still find themselves unable to access credit. Or they may only qualify for a very low credit limit. POS lenders take credit into account (Affirm, for example, does a soft pull on your credit when you first signup), but don’t weight it as heavily.

You’ve Maxed Out Your Credit Cards

While you may want to reconsider taking on more debt, there’s nothing really stopping you from utilizing both credit cards and POS loans.

Special Offers

It’s not unusual for credit card companies to offer 0% APR introductory rates. PoS loans also come with 0% APR offers, but they’re a little different. Instead of being attached to new accounts, Affirm will sometimes offer 0% APRs at specific partner stores.

You Like The Way The Loans Are Structured

Credit cards offer enormous flexibility in how they’re repaid. Other than making the required minimum monthly payment, you can throw any amount of money you want at your balance every month. At the same time, it’s not necessarily clear how much you should be paying to make a good dent in your balance. A POS loan has a prescribed end and tells you the amount of money you need to pay each month in order to meet it.

Final Thoughts

There’s a lot of diversity in the types of financing being offered to individuals and businesses these days. POS loans fit into the broader alternative lending trends. That is to say, they’re fast, easy, and more expensive. Still, they do provide options for borrowers who have a hard time otherwise accessing credit, or who wish to avoid credit cards’ minimum payment trap.

Meanwhile, if you’re a business that prefers old-fashioned credit cards, why not take a look at our business credit card comparison chart?

Chris Motola

Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

Chris Motola

“”

The Complete Guide To Card Brand Fees For Merchant Accounts

Our unbiased reviews and content are supported in part by affiliate partnerships. Learn more.

credit card processing fees image

In this guide, we’re tackling a surprisingly tricky and supremely detail-oriented topic in the world of card payment processing: card brand fees. Navigating these fees on your merchant account statement can feel like you’re on a scavenger hunt you didn’t sign up for — and not the fun kind. There’s no avoiding the fact that the devil’s in the details when it comes to card brand fees, but too many merchants overlook or misunderstand them at their own peril. Fortunately, Merchant Maverick is here to help you:

  • Understand card brand fees and how they apply to your specific merchant account.
  • Identify these fees on your statement with our reference list of commonly-charged card brand fees.
  • Discern if your card processor is ripping you off by messing with these fees.

Let’s dive right in, shall we?

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Card Brand Fees VS Interchange Fees

Wait, aren’t these the same thing? If you thought so, you’re not the only one. Many merchants are surprised to learn that interchange fees and card brand fees are two completely separate types of fees. If this includes you, then you are about to join the elite class of merchants who understand the difference!

The common conflation of these two fee types stems from the fact that both are considered part of the “wholesale” cost of card processing, as opposed to the “markup.” In processing lingo, “wholesale” simply means that your processor must pay these fees to a separate entity in the processing chain instead of keeping the money for its own use.

The key distinction between these two sub-categories of wholesale fees, therefore, is which link in the chain is owed each fee. Here’s the difference: An interchange fee goes to to the customer’s card-issuing bank, while card brand fees are ultimately paid to the actual card brands themselves (e.g., Visa, MasterCard, Discover, American Express).

For both of these wholesale costs, card processors and the merchant services providers (MSPs) who manage your accounts are faced with a choice. Do they itemize and “pass-through” these wholesale fees directly to the merchant? Or, do they absorb the wholesale cost into the pricing structure in other ways, perhaps by charging a higher processing rate or monthly fee? Or, do they use some solution in between?

As a merchant, you’re tasked with knowing how your own MSP handles wholesale fees — both interchange and card brand. We’re only addressing card brand fees in this article. For more on interchange fees and how the different pricing models (such as interchange-plus) incorporate them, see our complete guide to rates and fees.

Card brand fees are typically either a percentage of volume charge or a flat amount per instance. Some apply to all your transactions, while others only apply in very specific situations, such as when an authorization is abnormal in some way. We’ll cover these individual fees and their circumstances in the itemized list at the end of this article.

The good news is that card brand fees have set, established amounts across the industry. Like interchange fees, they’re considered non-negotiable, and the processor has no control over the amounts. The bad news is that finding the true wholesale amounts for card brand fees is generally more difficult than looking up interchange rates.

Before we delve into why these fees are so pesky, note that they’re also called card network fees, card association fees, or assessments (although, as you’ll see, an “assessment” is technically a specific sub-category of card brand fee).

Card Brand Fees Are Especially Tricky

Due to several regrettable quirks of the processing industry, card brand fees are particularly complicated and opaque. Here are the primary reasons:

  • They’re not displayed on the card brand websites. By contrast, interchange tables are readily available at the Visa and MasterCard websites.
  • You can’t call the card brands and ask about the fees. You’ll be redirected right back to your own MSP to answer any questions. It’s incredibly frustrating that we can’t rely on the card brands to disclose these base costs, and instead must rely on processors and MSPs to be honest when they pass the fees through.
  • Multiple fees may apply to the same authorization or transaction. For example, transactions paid with a foreign-issued card incur separate international surcharges on top of the regular assessment that’s applied to all your transactions.
  • The fees change (usually increase) over time. And not all at once. While they’re rarely decreased, sometimes particular fees are eliminated and/or replaced with others. Occasionally, a completely new fee is instituted, to which the only fitting response is…

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  • Many of the fees are known by multiple names and abbreviations, and it’s often difficult to match the names on your own statement with any established names.
  • Two or more fees may be combined into one on your statement, making them hard to identify and verify.
  • The fees can be spread throughout multiple sections of your statement — not grouped all together or even labeled properly — just in case you weren’t already driven bonkers by this stuff. Often, I’ve seen them buried inside “interchange” or “authorization” sections.
  • Brazen processors or MSPs may add their own markups to card brand fees without telling you. Or, they may invent fees and give them card-brand-sounding names. Yuck, right?
  • Most of the fees are small, so can be overlooked as inconsequential. They can still add up quite quickly, but the real issue at stake is the overall honesty and transparency of your provider. Regardless of whether an extra fee or markup here and there isn’t costing you that much, wouldn’t you still rather know about it?

How To Stay On Top Of Card Brand Fees

It’s a shame that merchants can’t rely on Gandalf’s wizardry for this quest. Instead, we suggest you follow our tips for navigating these fees:

  • Be aware that you may be charged only some, or even none, of these fees. This depends on several factors, including 1) your pricing model, 2) what your MSP decides to pass through versus absorb, and 3) what happens with your transactions and authorizations in a given month. With many blended, tiered or flat-rate plans, all or most of the card brand fees are absorbed into the overall cost of your account instead of itemized and passed through to you. There are no guarantees with any pricing model, however, so check your statements anyway!
  • Obtain a list of card brand fees from your merchant account provider. If they’re passing these fees through to you, they should provide a detailed list with the specific names and abbreviations they’re using.
  • Use a secondary, neutral source to confirm fee amounts. Our list below is a great place to start.
  • Keep a running list of the card brand fees you’ve seen on your own statements, along with the amounts. Reference lists are handy, but a personalized list is easier to use and track over time than a litany of every possible fee for every possible circumstance.
  • Processors shouldn’t mark up these fees without clearly informing you. And really, they should leave these fees alone completely. If the fee is charged at all, it should be passed through at cost.
  • Trust the amount more than the name. Identifying a fee on your statement is often more about looking at the rate or amount charged, as well as the specific number/volume/type of transactions to which it was applied. The process of elimination can be very effective here.
  • Definitely be suspicious if you spot extra fees that aren’t on the reference list, any that seem like duplicates or that can’t be matched with established values, or those that look too high. Don’t worry too much if a fee seems too low; it’s possible your processor is just absorbing or redistributing some of the cost.
  • Be on the lookout for fee change notifications. October and April are common transition points, but the fees can change at any time. Good processors will notify you (sometimes on the statement itself) when a card brand fee is set to increase or change. If your processor doesn’t fall in this camp, it’s all the more important that you bookmark this article.
  • Ask before you sign. If you’re just signing up for an MSP or changing providers, ask how it handles card brand fees in addition to interchange costs. Be very clear that you know the difference and want the specifics. Remember, not all customer service reps are created equal in their knowledge of this topic. Ask to be transferred up the chain if you’re not satisfied.

Final Thoughts (Let’s Crowdsource This!)

As merchants, you are on the front lines for tracking card brand fees. We believe your input will be key in keeping our reference list up to date. Some of you have processors who actually do a good job organizing and displaying card brand fees on statements, as well as notifying you of any upcoming changes. Is a fee on our list is no longer accurate? Are we missing a new, legitimate fee? Together, we can also help other merchants whose processors are abysmal at communicating fees, or even cheating business owners. Let’s all team up on this — leave a comment below!
International Service Assessment (ISA)

  • Surcharge owed on transactions that are processed in the US on a card issued outside the US.
  • 1.20% – International Service Assessment (ISA) – Non-US currency
    • Same fee as above, but incurs this higher rate when the transaction is settled in the cardholder’s local currency.
    • 0.45% – International Acquirer Fee (IAF)
      • Applies in same circumstance as the International Assessment above.

    Per-Item:

    • $0.0195 – Acquirer Processing Fee (APF): Credit
      • Owed on all credit transactions for US-based businesses, irrespective of where cardholder/issuer is located.
    • $0.0155 – Acquirer Processing Fee (APF): Debit
      • Owed on all debit transactions for US-acquired businesses, irrespective of where the cardholder/issuer is located.
    • $0.0195 – Credit Voucher Fee (Credit)
      • Owed on all refunds issued in the US via credit card.
    • $0.0155 – Credit Voucher Fee (Debit)
      • Owed on all refunds issued in the US via debit card.
    • $0.0018 – System File Transmission Fee / Base II Fee
      • Owed on all authorized transactions submitted for settlement (in addition to the above transaction fees). Base II refers to Visa’s settlement network.
      • Outdated Visa settlement fees:
        • $0.0025 – Settlement Network Access Fee. Base II fee may still be called by this name but should be $0.0018.
        • $0.0047 – Kilobyte (KB) Access Fee. Should not be charged in addition to the above.
    • $0.10 – Transaction Integrity Fee (TIF)
      • Owed on a debit or prepaid Visa transaction that fails to meet CPS requirements (e.g., not settled in 24 hours, no AVS submitted on a keyed transaction).
    • $0.09 – Misuse of Authorization Fee
      • Owed when a transaction is authorized, but not followed by a matching cleared transaction, or when a canceled or timed-out authorization is improperly reversed.
    • $0.20 – Zero Floor Limit Fee
      • Owed when the merchant submits a settlement transaction without an authorization.
    • $0.025 – Zero Dollar Verification Fee
      • Owed when the merchant verifies a cardholder’s information (e.g., AVS, CVC2) without authorizing a transaction.

    Other:

    • Varies – Fixed Acquirer Network Fee (FANF)
      • A flat fee based on your volume per month, type of business (Merchant Category Code or MCC), number of locations, etc. Typically charged quarterly or monthly. Learn more about the FANF here.

    MasterCard Network Fees

    Volume-Based:

    • 0.12% – Assessment / Acquirer Brand Volume Fee – Transactions <$1,000 and all Signature Debit
      • Owed on gross commercial and consumer credit transactions less than $1,000, as well as all signature debit.
    • 0.14% – Assessment / Acquirer Brand Volume Fee – Transactions >$1,000)
      • Owed on gross commercial and consumer credit transactions exceeding $1,000; excludes signature debit. Note: May be listed as 0.02% surcharge over the above assessment.
    • 0.0075% – Acquirer License Fee (ALF) / License Volume Fee 
      • Owed on gross transaction volume. Increased from 0.0045% Oct. 2017. Note: sometimes combined with the above assessments, bringing the totals to 0.1275% and 0.1475%, respectively.
    • 0.60% – International / Cross-Border Assessment Fee (Domestic)
      • Surcharge owed by US-based merchants on transactions on a card issued outside the U.S. settled in USD. (Similar to Visa’s ISA.)
    • 1.00% – International / Cross-Border Assessment Fee (Foreign)
      • Same fee as above, but incurs this higher rate when the transaction is settled in the cardholder’s local currency. (Similar to Visa’s ISA.)
    • 0.85% – International Acquirer Program Support Fee
      • Applies in same circumstance as the Cross-Border Assessment above. (Similar to Visa’s IAF.)
    • 0.01% – Digital Enablement Fee
      • Owed on all card-not-present transactions for signature debit, consumer credit, and commercial credit cards.
    • 1.57%Global Wholesale Travel Transaction B2B
      • Owed instead of regular assessments, international surcharges, and NABU fees when the MasterCard B2B (MSB) card product has been used. Applies to a specific set of Merchant Category Codes (MCCs) in the travel and entertainment sector.

    Per-Item:

    • $0.0195 – Network Access and Brand Usage Fee (NABU Fee)
      • Owed on all US-based authorizations, regardless if settled. (Similar to Visa’s APF, Discover’s Data Usage Fee.)
    • $0.0044 – Kilobyte (KB) Access Fee
      • Owed on each authorized transaction submitted for settlement. Note: we’re in the process of checking to see if it’s still charged.
    • $0.01 – AVS Fee (Card-Not-Present)
      • Owed on card-not-present transactions processed using Address Verification Service (AVS). Often shows up on a statement under “Authorizations.”
    • $0.005 – AVS Fee (Card-Present)
      • Owed on Card-Present transactions processed using AVS. Often shows up under “Authorizations.”
    • $0.0025 – Card Validation Code Fee
      • Owed on all transactions involving CVC2 authorization.
    • $0.025 – Account Status Inquiry Fee
      • Owed when a merchant verifies AVS or CVC2 without authorizing a transaction.
    • $0.03 – SecureCode Transaction Fee
      • Owed on all MC SecureCode verification attempts (SecureCode service requires merchant signup).
    • $0.055 – Processing Integrity Fee
      • Owed for transactions that do not comply with best practices for transactions (i.e., not properly cleared/settled/reversed within MasterCard’s time frames for the type of transaction). Below are similar fees for other types of authorization integrity issues:
        • $0.045 – Processing Integrity Fee, Pre-Authorization
        • $0.045 – Processing Integrity Fee, Undefined Authorization
        • $0.040 minimum, or 0.25% – Processing Integrity Fee: Final Authorization
    • $0.012 – Processing Integrity Fee Detail Reporting
      • Owed on any authorization that generates a processing integrity fee for pre-authorization, undefined authorization, or final authorization.

    Other:

    • $1.25/mo. ($15 per year) – Merchant Location Fee
      • $15 annually for each location with traditional MSPs/processors ($3 annually for payment facilitators like Square). Not applicable to merchants processing under $200/month, nor to charitable or religious organizations.
    • $500 – Yearly Registration Fee
      • For online e-cigarettes/vaping businesses.

     Discover Network Fees

    Volume-Based:

    • 0.13% – Assessment
      • Owed on gross transaction volume.
    • 0.55% – International Processing Fee
      • Owed on US-based transactions processed with a card issued outside the U.S.
    • 0.80% – International Service Fee
      • Applies in same circumstance as the International Processing Fee above.

    Per-Item:

    • $0.0195 – Data Usage Fee
      • Owed on all authorized transactions. (Similar to Visa’s APF and MasterCard’s NABU Fees.)
    • $0.0025 – Network Authorization Fee
      • Owed on all authorized transactions. Replaced the Data Transmission Fee in 2013, which only applied to settled transactions.

    American Express OptBlue Network Fees

    American Express OptBlue

    Volume-Based:

    • 0.15% – Assessment
      • Owed on gross transaction volume.
    • 0.40% – International Assessment / Inbound Fee
      • Surcharge owed on transactions involving a card issued outside the US.
    • 0.30% – Card-Not-Present Surcharge
      • Surcharge owed on any transactions considered CNP, including keyed and ecommerce transactions.
    • 0.75%Technical Specification Non-Compliance
      • Owed on transactions that do not meet Amex standards, such as an authorization not obtained at the same time as a sale. Much rarer than Visa and MasterCard fees for transaction integrity problems.

    Per-Item:

    Rose Holman

    Rose’s eclectic professional background includes teaching, research, retail, non-profits and music. Upon returning to her Pacific Northwest roots following a four year stint in the tiny country of Luxembourg, she immediately applied her innate curiosity and lifelong love of explaining stuff to the world of merchant accounts. Her hobbies include devouring podcasts, practicing minimalism, and singing four-part harmony with her husband and two kids.

    Rose Holman

    “”

    How Can I Get A Bank Loan For My Business If I’ve Had A Bankruptcy?

    Our unbiased reviews and content are supported in part by affiliate partnerships. Learn more.

    Bankruptcy shouldn’t be taken lightly. Aside from asset forfeiture, the shock to your credit rating is the main disincentive to filing bankruptcy. Prospective filers are cautioned that they’ll have a hard time accessing credit for up to a decade. While there’s some truth to these warnings, the worst case scenarios are also a bit overblown.

    It’s possible to get bank loans after a bankruptcy, but you may have to work a bit harder to get them and approach the process with an open mind. We’ll look at some of the questions you should ask and strategies you can pursue below.

    Table of Contents

    What Happens To My Credit Score?

    Even after bankruptcy, your credit rating will be one of the biggest determining factors in whether or not a bank will lend to you.

    While you might assume bankruptcy completely destroys your credit, the truth is a bit more complicated. You can expect a bankruptcy to shave a hundred or two points off your credit rating which, of course, isn’t great. How negatively impacted your credit is will depend on the amount of debt being discharged and how many accounts are delinquent, as well as how many accounts are current. In fact, depending on how bad your credit was at the time you declared bankruptcy, it’s not impossible that your credit might slightly improve.

    The bankruptcy will stay on your record for seven to 10 years, but your credit can begin to improve immediately.

    How Can I Improve My Credit Score After Bankruptcy?

    There are a number of different ways to improve your credit. Some of them apply to everyone, others more specifically those with bankruptcies on their record.

    • Get A Secured Credit Card: Unlike regular credit cards, secured credit cards require a cash payment as collateral. In fact, that deposit serves as your credit line. It’s not a great deal, but it will help rebuild your credit and offer the functionality of a credit card.
    • Pay Your Bills On Time: This is pretty obvious, but keeping your accounts current will help.
    • Use Only A Fraction Of The Credit You Have: Keep your balances small (somewhere below 25 percent of your available credit).
    • Take Out Loans and Keep Payments Current: Availability will vary based on your credit rating. We’ll be looking at some options below.
    • Use Alternative Lenders: Many alternative lenders cater to individuals and businesses with bad credit, just be aware that some of them won’t work with a borrower who recently declared bankruptcy.
    • Consider A Hard Money Loan: If you’re looking at a short-term real estate investment, hard money provides a risky way to get financing with bad credit.
    • Wait: On the bright side, the farther you get away from the date of your bankruptcy, the less impact it will have on your credit rating.

    What Loans Are Available?

    Lending is a gamble, but there are lenders willing to take a bigger risk in exchange for a potentially larger payday. Believe it or not, it’s possible to get a personal loan almost immediately after you declare bankruptcy. Business loans aren’t off the table either, although you may have to jump through additional hoops to prove the creditworthiness of your business plan.

    The bad news is that you’re probably going to be paying through the nose for any credit that’s extended to you. But if you’re judicious about how much you borrow and don’t let a lot of interest accrue, you can still make good use of loans.

    Since we’re looking specifically at bank loans, the good news is that they tend to be a bit more conservative when it comes to how much they’ll extend you and the length of the terms. Keep an eye out for any supplemental fees they charge on high-interest products.

    Mortgages are a different story. It’s almost unheard of for a bank to offer a mortgage to a newly bankrupt customer. Depending on the type of mortgage you’re looking for, the waiting times can range from one to four years. If you’ve previously defaulted on a mortgage, your wait time is more likely to fall on the longer side of that range.

    How Can I Find The Right Bank?

    Not all banks have the same bankruptcy policies. Consider keeping your business and personal accounts with a bank or credit union willing to extend you credit. You’ll also want to gather as much information as you can about what products are offered to customers with a bankruptcy on their record.

    Be wary of extremely high-interest rates and (especially) any monthly maintenance fees charged in addition to interest.

    What If I’ve Filed Chapter 13?

    Unlike Chapter 7 bankruptcies, Chapter 13 bankruptcies last several years while your business undergoes restructuring. During this time, you’ll have trustee-enforced restrictions on how you can borrow.

    Final Thoughts

    As big an impact as a bankruptcy has on your life and business, it’s by no means the end of the line in terms of getting credit. Just be patient, weigh your options carefully, and don’t get taken advantage of.

    Chris Motola

    Chris Motola is an independent writer, journalist, programmer, and game designer who has mastered the art of using his laptop in no fewer than 541 positions, most of them unergonomic. When he’s not pushing keys or swiping screens, he’s probably out exploring urban or natural environs, experimenting in the kitchen, or delighting/annoying his friends with his ideas and theories.

    Chris Motola

    “”