Is Credit Card Stacking Right for Your Business?

Access to capital is essential for getting a business off the ground and sustaining long-term momentum.

A popular strategy for many businesses that need quick financing is credit card stacking.

What Is Credit Card Stacking?

This is a financing strategy where a business applies for multiple credit cards from multiple lenders to gain access to a higher overall credit limit.

By doing so, they’re able to maximize their cash flow in a way that would otherwise be difficult or impossible.

Rather than only using one credit card issuer, which limits the amount of capital they can access, credit card stacking can increase cash flow significantly.

Say, for example, a business owner applies for a single business credit card.

According to 2020 Experian data, the average small business credit card limit is $56,100, which means the company would only have a maximum credit card limit of $56,100.

But let’s say they used credit card stacking and applied for five business credit cards.

Assuming they were approved for all five, they would have a combined maximum credit limit of $280,500.

And if they applied and were approved for 10 credit cards, they would have a combined maximum credit limit of $561,000.

So as you can see, credit card stacking is a simple yet effective way to dramatically increase cash flow with multiple loans.

Note that it’s especially popular with small business owners or new startups who are unable to qualify for a larger loan with a higher credit line.

If, for instance, someone didn’t qualify for an SBA loan or a business line of credit, credit card stacking could potentially provide them with a comparable or even greater amount of capital.

In this respect, you can think of it as a loophole that allows businesses to quickly secure a higher amount of funding than they would otherwise have access to.

Credit Card Stacking Pros

Quick Access to Capital

One of the main benefits is that most credit cards tend to have quick approval, which means fast funding.

For example, an SBA loan typically takes 30 - 90 days from filling out the initial application to receiving funding.

But most business credit cards only take 7 - 10 days.

Large Credit Limit

As we mentioned earlier, perhaps the biggest draw of credit card stacking is the large credit limit companies can access.

Again, if you were approved for just one business credit card with an average credit limit, you would have access to around $56,000.

But if you were approved for seven business credit cards with average credit limits, your combined limit would be over $392,000.

It’s simple mathematics. Credit card stacking with multiple cards is an effective way of securing more capital than only using one card.

Rewards

Like personal credit cards, one of the great things about business credit cards is that many come with enticing rewards such as welcome bonuses, points, a gift card, and cashback.

While using just one or two business cards should offer some decent rewards, everything is compounded when using multiple cards.

Besides that, many credit card companies have attractive introductory offers like 0% APR on purchases and balance transfers for 6 - 18 months.

If you’re looking to cash in on rewards and have 0% APR for the introductory period, business credit card stacking is a strategy to consider.

Business Spending Flexibility

Spreading your business spending across several credit cards gives you the flexibility that you wouldn’t otherwise have with just one or two cards or a traditional business loan.

This allows you to better manage your monthly spending by dedicating one particular card to one specific type of business expense, for example.

So as a business owner, it allows you to cast a wider net with your cash flow and diversify your lenders.

Credit Card Stacking Cons

High Interest and Fees

Although many business credit cards have little or no interest rate initially, once the introductory offer has ended, you’ll often encounter high interest rates.

Even the best business cards have a regular APR starting at around 18%. But many have an APR of 26%, and some even go as high as 35%.

And when you’re doing this at scale and using multiple business credit cards, the interest can really add up.

On top of that, most cards have additional fees, such as an annual fee, late payment fee, foreign transaction fee, and cash advance fee, which can potentially create economic hardship for a business owner.

You Can Quickly Run Up a High Credit Card Debt

On one hand, using multiple credit cards is helpful because it provides access to a much higher credit limit than using just one or two cards.

But on the other hand, it’s inherently risky because having several cards makes it easy to overspend.

If you get behind on payments, this can quickly lead to significant credit card debt, which can spiral out of control.

That’s why it’s vital to spend responsibly and always make business credit card payments on time or in advance.

A Personal Guarantee is Often Required

While there are some business credit cards that don’t require a personal guarantee, most do.

So that’s something you should generally expect to encounter when applying.

The problem with a personal guarantee is that it means a lender can come after your personal assets if you’re unable to repay your credit card debt.

And when you’re using multiple credit cards, your odds of encountering an issue like this inevitably increase.

There Are Additional Fees if You Use a Credit Card Stacking Company

It should also be noted that some businesses, especially many small business owners, choose to partner with a credit card stacking company (we’ll discuss this in more detail later).

If you decide to go this route, you’ll have even more fees in addition to the ones you already have when using a business credit card.

In many cases, this surplus of fees negates the positive impact of using this strategy in the first place.

Is Credit Card Stacking a Good Idea?

At this point, we’ve established that credit card stacking has its pros and cons. But let’s look at the bottom line.

Is this strategy a good idea and something you should seriously consider to fund your business?

Let us start by saying it can certainly be viable in the right situation as long as you use credit card stacking responsibly.

If, for example, you need fast access to business financing, aren’t eligible for traditional business loans or business lines of credit, and feel confident that you can consistently repay your credit card debt on time or in advance, this strategy can make sense.

However, if you are eligible for traditional business loans, business lines, or a merchant cash advance and can secure the credit limit you need without using several credit cards, that’s probably your better option.

Also, if you’re prone to overspending and have had issues repaying credit card debt in the past, credit card stacking likely isn’t a good idea because falling behind can lead to hefty fees and negatively impact your business credit score.

Who is it Right For?

Credit card stacking is typically best for business owners that:

Have good personal credit
Aren’t able to obtain the amount of financing they need through traditional loans and business tradelines
Need quick access to business financing
Have strong financial discipline and are comfortable managing multiple business credit cards simultaneously
Feel confident they’ll be able to repay their credit card debt on time or in advance

Because having business credit cards is one of the best ways to build business credit, loan stacking can also work well for those that are looking to build business credit and raise their credit score.

Just like when building personal credit, as long as credit card companies report to major credit bureaus and you make your payments on time, this should increase your credit score.

In turn, this can open more doors for business financing in the future and help you negotiate better terms.

What Are Credit Card Stacking Companies and What Do They Do?

There are two options when using credit card stacking. You can do it yourself or partner with a credit card stacking company.

We personally suggest doing it yourself, mainly because of the fees that come along with partnering with a company.

To quantify, Fit Small Business states that “credit card stacking companies typically charge a fee ranging from 9% to 15% of the approved credit limit, which may vary per stacking lender.”

So if you got $150,000 in financing and a company charged 9%, you would have to pay $13,500 in fees.

Not to mention the fees you’re already paying with the credit cards themselves.

But if you just do it yourself, you can save a lot of money.

And it’s not overly complicated. It simply involves scaling up your efforts and applying for multiple business credit cards rather than just one or two.

The real trick to successful business credit card stacking is to apply for the credit cards all at the same time, on the same day. That way the inquiries don’t have time to damage your credit scores before you apply to the next cards.

Because if you get 10 hard inquiries on your credit report, rest assured your credit scores will take a major hit.

Closing Thoughts

Credit card stacking is a high-risk, high-reward business financing strategy.

When done responsibly, it can provide fast access to a high volume of cash flow to help a business quickly gain momentum.

But when done irresponsibly, it can lead to a business racking up high interest, fees, and large credit card debt.

Therefore, you want to look at all the angles and do your research before diving into credit card stacking.

Is Credit Card Stacking Right for Your Business? | eCredable (2024)