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If you’re a business owner looking to open a credit card, you may have come across charge cards. Similar to credit cards, charge cards allow you to streamline spending, open employee cards and benefit from rewards and other perks. However, they provide a different set of features than traditional credit cards, and are better suited for businesses that have a stable cash flow and are looking for expanded purchasing power.
We’ll review the differences between business charge cards and business credit cards, then list the pros and cons of choosing a business charge card.
Charge card vs. credit card
There are two main types of business cards: charge cards and credit cards. The number of charge cards has dwindled over the years, with American Express® being the only major issuer still offering them.
Charge cards and credit cards can be used in similar ways, but have two main differences:
- Spending limits. Charge cards have no preset spending limit, which doesn’t mean unlimited spending, but does mean a higher spending limit than a credit card. Traditional credit cards have preset spending limits (aka credit limits) that cap how much you can charge on the card.
- Payments. You may have noticed that charge cards don’t list APRs under the rates and fees, and that’s because you’re required to pay in full each month. In comparison, credit cards let you roll over a balance month to month, with interest. Depending on your business’ cash flow, the charge card requirement to pay in full each month may be a setback.
When asked why Amex still issues charge cards, a representative stated, “No two businesses are alike, and American Express offers a range of both charge and credit cards for businesses to consider depending on their specific business needs.”
Each type of card provides different benefits for cardholders, so depending on your business needs, one may be a better choice than the other.
Charge card credit score requirements
Generally, good to excellent credit is required for business cards, whether you’re applying for a charge card or credit card. The score required for a business charge card isn’t necessarily higher than the score required for a business credit card.
Every application is unique, and the decision to approve an applicant is based on a variety of factors, including information provided on the application, as well as information from other sources, such as the credit bureaus (TransUnion, Equifax and Experian), according to American Express.
Pros and cons of business charge cards
Higher spending limit. Charge cards don’t have a preset spending limit, allowing you to benefit from increased buying power compared to credit cards. Just know, this doesn’t mean you have unlimited spending power. According to Amex’s terms, “Purchasing power adjusts with your use of the card, your payment history, credit record and financial resources known to [Amex], and other factors.”
Mark Zablow, founder and CEO of Cogent, an entertainment marketing agency that connects brands with celebrities, influencers and experiences stated, “[The Business Platinum® Card from American Express] allows us the flexibility if we have a massive charge that comes up.”
May offer more robust rewards and perks. In the case of Amex business charge cards, the rewards and added benefits can be considered premium compared to business credit cards. You may receive higher rewards rates, larger new cardmember offers, various insurances and protections, travel perks and more with a charge card versus a credit card.
For example, travel is a major expense for Zablow and his employees, so the added travel benefits of airport lounge access, free Wi-Fi access and 35% points back on airline redemptions (up to 500,000 points back per calendar year) help make business trips less stressful and more cost-effective.
“When you’re traveling and you have employee and team members going in and out of the airport, the little perk of sitting down and freshening up … can change your personality,” Zablow said of airport lounge access benefits.
After all, employees are the face of your company, and you want them to be happy and comfortable when traveling.
Potentially high annual fees. Since there’s no preset spending limit and often more robust rewards and benefits, charge cards typically have high annual fees. For example, The Business Platinum® Card from American Express has a $595 annual fee.
The Business Platinum® Card from American Express may be costly, but the “perks add up super fast,” Zablow said. If you do the math and utilize many of the benefits provided by your card, they can help offset the annual fee.
However, there are still some charge cards available with annual fees ranging from $0 to $295.
Can’t carry a balance month to month. Charge cards aren’t ideal for business owners who struggle with cash flow, since cardholders are required to pay statement balances in full each month. However, Amex does offer the Pay Over Time option that allows you to carry a balance with interest on purchases of $100 or more.
No special financing periods. Charge cards lack introductory 0% APR periods that are characteristic of many business credit cards. So you’ll miss out on financing new purchases with credit cards like The Blue Business® Plus Credit Card from American Express that offers an intro 0% for 12 months on purchases (after, 15.24% - 21.24% Variable APR).
Charge card or credit card: Which is right for my business?
Businesses just starting out may be better off with a traditional credit card that may offer special financing and no or low annual fees. These cards can help get your business up and running, especially when you don’t have a stable cash flow and may need to carry a balance month to month.
Zablow said he started out with several business credit cards, but now exclusively uses his charge card, The Business Platinum® Card from American Express.
When Cogent was a new business, Zablow initially chose intro 0% APR cards, cashback cards and airline-specific cards that suited his business’ needs at the time. But, as the business grew, Zablow chose The Business Platinum® Card from American Express for its flexibility, rewards and numerous added perks.
Once your business is established and has a more stable cash flow, you can consider opening a charge card. According to Amex’s website, “[A business charge card] may be the right choice for a business that is comfortable it has the cash flow to pay in full each month and is looking for a flexible spending limit.”
Amex charge cards
Earn up to 75,000 Membership Rewards® points*
Complimentary access to over 1000+ airport lounges*
Get 50% more Membership Rewards® points. That's 1.5 points per dollar, on each eligible purchase of $5,000 or more*
- Welcome Offer: Earn up to 75,000 Membership Rewards® points.
- Earn 50,000 Membership Rewards® points after you spend $10,000 and an extra 25,000 points after you spend an additional $10,000 all on qualifying purchases within your first 3 months of Card Membership.
- Get 5X Membership Rewards® points on flights and prepaid hotels on amextravel.com.
- Get 50% more Membership Rewards® points. That's 1.5 points per dollar, on each eligible purchase of $5,000 or more. You can get up to 1 million additional points per year.
- 35% Airline Bonus: Use Membership Rewards® Pay with Points for all or part of a flight with your selected qualifying airline, and you can get 35% of the points back, up to 500,000 bonus points per calendar year.
- Enroll to get up to $200 in statement credits annually by getting up to $100 semi-annually for U.S. purchases with Dell. Terms apply.
- Get one year of Platinum Global Access from WeWork. With this membership, you can access 300+ premium, inspiring workspaces in 75+ cities. To get this exclusive offer, enroll between 2/15/2019 and 12/31/2019.
- Terms Apply
- See Rates & Fees
See additional details for The Business Platinum® Card from American Express
Earn up to $500 back in the form of statement credits by purchasing qualifying services with FedEx using your American Express® Business Gold Card within the first 3 months of Card membership, Limited time Offer ends 11/06/2019*
Get 4X Membership Rewards® points on the 2 select categories where your business spent the most each month*
No foreign transaction fees & many helpful business tools*
- Earn up to $500 back in the form of statement credits by purchasing qualifying services with FedEx using your American Express® Business Gold Card within the first 3 months of Card membership.
- Limited time Offer ends 11/06/2019.*
- MORE REWARDS: Get 4X Membership Rewards® points on the 2 select categories where your business spent the most each month**
- **4X points apply to the first $150,000 in combined purchases from these 2 categories each calendar year.*
- AIRLINE BONUS: Get 25% points back after you use points for all or part of an eligible flight booked with Amex Travel, up to 250,000 points back per calendar year.*
- PAY OVER TIME OPTION: A flexible payment option to help manage cash flow on purchases of $100 or more.*
- EXPENSE MANAGEMENT TOOLS: Connect to Quickbooks, access SpendManagerSM, receive a Year-End Summary, and more.*
- *Terms Apply
- See Rates & Fees
See additional details for American Express® Business Gold Card
Receive 1.5% discount for paying early*
Take up to 60 days to pay with no interest*
No foreign transaction fees & no fee for extra employee cards*
- Paying early pays off: Get a 1.5% discount when you pay early, with no cap on what you can earn back.
- Take up to 60 days to pay with no interest, if you pay your minimum due.
- 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.
- See Rates & Fees
See additional details for The Plum Card® from American Express
Business charge cards provide increased purchasing power and the potential to benefit from premium perks. If your business has good or excellent credit and wants to take advantage of these perks, a business charge card can be a good choice. Just beware you generally can’t carry a balance month to month unless you use the Pay Over Time feature, and there’s a lack of special financing periods and possibly high annual fees. If you want a traditional business credit card, check out our roundup of the best small business credit cards.