Business charge cards allow you to make purchases without using cash on hand. Instead of having a predetermined credit limit like credit cards, business charge cards have no preset spending limit. However, you’re required to repay your balance in full every month to avoid late payment fees.
What Is a Charge Card?
Charge cards let you make purchases, earn ongoing rewards, and offer valuable perks, including insurance and fraud protection. They carry no annual percentage rate (APR) because they’re required to be paid off every billing period. They typically have no preset spending limits and are best for borrowers with personal credit scores of at least 670.
A business charge card is the same thing as a personal charge card but for business owners. It’s an excellent option for short-term cash flow management and employee spending. However, you can’t carry a balance. If you need to carry a balance, consider a small business credit card.
How a Business Charge Card Works
You must pay off most business charge cards every month, but some allow longer repayment periods (60 days or more). Instead of having an approved credit limit, you’ll have no preset spending limit, making it a high limit business card. You can spend as much as you need, as long as you pay your entire balance off every billing period.
Because there is no preset spending limit, it’s impossible to calculate your credit utilization ratio. Your charge card balance will still be reported to the credit reporting bureaus each billing period, even if they don’t affect your credit score. Credit agencies will still evaluate other factors, including your payment history, which can help you build your business credit.
If you have a small business credit card and pay it off in full every month, it would be similar to using a business charge card. If you can’t afford to pay off your balance in full monthly, then a charge card is not best for you. Instead, a good card option would be a 0% APR business credit card.
When Business Charge Cards Are Beneficial
Business charge cards are designed for business owners with established companies and a steady cash flow. They are best for business owners who are well-qualified, can afford to pay off their balance in full every month, and want no preset spending limit. If you fall into these categories, choosing a business charge card can be an excellent way to finance your business purchases.
Business charge cards are beneficial for:
- Business owners who are well-qualified: Typically, you’ll need a personal credit score of 670 to get a business charge card. This is because of the no preset spending limit. If your personal credit score is below 670, consider a fair credit business credit card.
- Business owners who can pay off their balance in full monthly: Unlike small business credit cards, charge cards are due in full every month. If you fail to meet this requirement, your account will be hit with a late fee of at least $38. There are some cards that let you pay over time with interest, which may help you fund your business.
- Business owners who want no preset spending limit: Business charge cards typically have no preset spending limit because they’re due in full monthly. This is beneficial to business owners who are looking to make large purchases and know they can afford to pay off their balance in full monthly.
You may want to use a company charge card if you want the flexibility of being able to make large purchases with no preset spending limit. Additionally, it’s important to only open a charge card account if you know you can meet the monthly payment requirement. If you’re not sure if you can pay off your balance in full every month, a 0% APR business credit card is a better option.
Business Charge Cards Costs
Most business charge cards carry an annual fee between $95 and $595. Charge cards with higher annual fees generally come with more robust additional card features, such as travel protections and insurances. Additionally, charge cards don’t carry APRs because they’re required to be paid off in full monthly. If you miss a payment, you will be hit with a late fee of at least $38.
Common business charge cards costs are:
- Ongoing APR: None, because charge cards must be paid off in full monthly
- Annual fee: $95 to $500 or more, which is sometimes waived for the first year
- Late fee: $38 or more
Compared to small business credit cards, business charge cards typically carry higher annual fees. Business charge cards with higher annual fees usually offer better ongoing rewards and additional features.
Business Charge Cards vs Business Credit Cards
Business charge cards and credit cards are both designed to help your business with its temporary cash flow needs. However, while both offer a quick source of financing and convenience in paying for your business-related expenses, charge cards and credit cards are not entirely the same. They have different features, such as repayment terms, fees, APRs, and spending limits.
Here are the primary differences between business charge cards and credit cards:
Business Charge Card Balances Are Due in Full Monthly
Charge cards require you to pay your total balance each month. If you fail to do so, you’ll risk damaging your credit score and you may be charged with big penalties. This lets you manage your expenses and avoid charging more than what you can afford to pay within the month.
With business credit cards, you’re only required to make a minimum monthly payment, although it’s smart to pay off your balance in full, if possible. You’ll have to pay interest on any unpaid balances, which will carry over to your next month’s balance. This repayment schedule allows you to manage your business’ cash flow. When cash is tight, you have the option to pay just the minimum balance, knowing the unpaid balances will accrue interest until they’re fully repaid.
Business Charge Cards Have Higher Late Payment Fees
Both business charge cards and credit cards charge late payment fees. However, charge cards typically levy higher late payment fees than credit cards. You can avoid late payment fees on a credit card by paying your minimum payment, which is a fixed percentage of your total balance each month.
Business Charge Cards Don’t Carry Ongoing APRs
One benefit of a company charge card is that it doesn’t carry ongoing APRs, letting you borrow money interest-free. This is because you are expected to pay your balance in full every month. Business credit cards, however, carry ongoing APRs and charge interest on any unpaid balances at the end of the billing period.
Business Charge Cards Have No Preset Spending Limits
Unlike business credit cards, business charge cards don’t have a preset spending limit. This means you can use your card for business-related purchases without worrying about hitting your credit limit. Business credit cards work differently because you’ll receive a credit limit predetermined by your issuer. You can reuse your credit card’s limit as you repay your balance over time.
Best Business Charge Cards for Small Business
American Express is the only major credit card issuer that offers business charge cards. When deciding which charge card is best for you, it’s important to consider the overall rewards, additional card features, and if it offers payment flexibility. American Express business charge cards offer robust rewards and the ability to spend big on your business.
The Plum Card® from American Express
Accessing early pay discounts or 60 days of no interest
- Paying early pays off: get a 1.5% Early Pay Discount, with no cap on what you can earn back.
- Take up to 60 days to pay with no interest, when you pay your minimum due by the Payment Due Date.
- Use the power of the Plum Card to buy big for your business.
- No Foreign Transaction Fees.
- Introductory annual fee of $0 for the first year, then $250
- Terms & Restrictions Apply.
- 1.5% discount when you pay early, or
- Take up to 60 days to pay your balance
- You’ll pay a high annual fee after the first year
- You must repay your balance every month
- Premium roadside assistance: Provides the following services at no additional cost up to four times per year: towing up to 10 miles, winching, jump starts, flat tire change, lockout services, and delivery of two gallons of gas.
- Purchase protection: Covers purchases damaged or stolen within 120 days from the purchase date. Coverage is limited to 1,000 per incident and $50,000 per year.
- Extended warranty protection: You’ll receive an extended warranty protection plan for purchased items with manufacturer’s warranties of up to five years.
The Plum® Card from American Express is best for business owners who want no preset spending limit and payment flexibility. You’ll have the opportunity to earn pay-early discounts or opt in to free financing terms. If you don’t opt in to the free financing terms, this charge card is required to be paid in full monthly.
Unlike other American Express charge cards that require you to be invited to pay over time with interest, this card allows you to opt in on your own. Additionally, you’ll have access to several additional card perks, including roadside assistance, extended warranty protection, and purchase protection. You can learn about these features and this card’s offerings in our review of The Plum® Card.
Paying Off Business Charge Cards Over Time
Although most charge cards are due in full monthly, American Express offers its Pay Over Time feature on some of its business cards, including the American Express Business Green Rewards Card . It allows you to pay eligible charges over time with a predetermined APR.
Once enrolled, eligible charges will automatically be placed into a Pay Over Time balance, while any ineligible charges will be required to be paid in full. You have the option to settle your Pay Over Time balance in full, pay only the minimum amount due, or anything in between. To avoid penalties, you should pay at least the minimum payment due from the Pay Over Time balance, including any amount that is required to be paid in full each month.
Pros & Cons of Business Charge Cards
Business charge cards can be an excellent method of financing if your business generates enough revenue to pay off your balance in full every month. You can earn rewards on your everyday purchases, have access to unbeatable card features, and avoid the risk of accruing interest charges. However, qualifying is more difficult and there are no introductory 0% APR periods.
Pros of Business Charge Cards
- Earn rewards on your business-related purchases: Similar to business credit cards, some charge cards offer rewards for your everyday business-related expenses. These rewards can serve as a “discount,” allowing you to save money on your purchases.
- Offers robust additional card features: American Express business charge cards offer some of the best additional card features, such as extended warranty, purchase and return protection, and several travel insurances. These features are worth thousands of dollars every year and can increase the card’s value.
- No risk of accruing interest charges: Charge cards don’t carry any interest because you must repay your full balance every month. Those who can meet this requirement will benefit from never accruing interest charges.
Cons of Business Charge Cards
- Qualifying is more difficult: Since charge cards generally have no preset spending limit, the qualification requirements are more difficult. For example, most credit card issuers require business owners to have good to excellent personal credit scores (of at least 670) to qualify. If your score is below 579, you should consider a secured business credit card.
- Required to be paid off in full monthly: The major difference between a business charge card and business credit card is the repayment schedule. Business charge cards must be paid off every month in full and carry no APRs. Business credit cards, on the other hand, only require a monthly minimum payment.
- No introductory financing periods: Charge cards don’t offer any introductory 0% APR periods on balance transfers or help finance large purchases. If you are looking for special financing periods, consider a no-interest business credit card.
Business charge cards can be beneficial for business owners who have steady cash flow and want a way to make large purchases. You can avoid the risk of interest altogether and also have access to unrivaled card features that provide several valuable travel perks. However, there are other alternatives available if a charge card doesn’t fit your specific business situation.
Frequently Asked Questions (FAQs) About Business Charge Cards
We covered a lot of information on business charge cards and when they’re beneficial. There are some questions that are asked more often than others, and we address those here. If you have any other questions, feel free to comment below, and we will provide an answer.
Do charge cards still exist?
American Express is the only major credit card issuer that offers business charge cards. A good rule of thumb is that if a card doesn’t carry an interest rate and is due in full every month, then it’s likely a charge card. If it has an APR, it’s a credit card.
What qualifies you for a business credit card?
To qualify for a business credit card, you either need an employee identification number (EIN) or you can use your Social Security number (SSN). Additionally, most credit card issuers require you to have a good personal credit score (of at least 640) to qualify. However, we recommend having a score of 670 or higher.
What is the difference between a credit card & charge card?
The main difference between a credit card and a charge card is the ability to carry a balance from month to month. Charge cards don’t extend credit, and you’re required to pay off the balance in full monthly. Credit cards are expected to be paid off every month, but only require a monthly minimum payment.
Overall, business charge cards are an excellent alternative to a business credit card if you can afford to pay your balance off in full monthly. Charge cards carry no interest and generally have no preset spending limit. They’re most beneficial for business owners who are well-qualified and have personal credit scores of 670 or more.
For rates and fees on The Plum® Card from American Express, please click here.
For rates and fees on the American Express Business Green Rewards Card, please click here.