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What is a Charge Card? Should You Use One for Your Business?

By on October 29, 2021 4 min read
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What is a Charge Card? Should You Use One for Your Business?

Charge cards are not as popular as credit cards or debit cards. If you own a business, you might be a little bit confused about what a charge card is. If you’re a new business and you’re looking to establish a line of credit, it’s important to know about all of your options.

Although charge cards aren’t as common as credit cards, they can offer some very specific benefits to business owners. 

Today, we’ll discuss what a charge card really is and why you may want to consider one for your business.

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What Is a Charge Card?

A charge card is a payment card. In some ways, it’s similar to a credit card; however, it doesn’t have a preset spending limit. These allow you to spend as much as you want for your business, as long as you pay off your balance completely and on time every month.

Features of a Charge Card

Charge cards offer several distinct features that can be helpful for business owners. These include: 

No Preset Spending Limit

Charge cards do not come with a credit limit. Instead, the spending limit varies depending on several factors, such as payment history, card use, and the overall financial health of your business.

Users typically have access to an online portal that they can check from their phones or computers to see what their spending limit is on a given day. 

No Interest Rates

Since charge cards don’t carry a balance from one month to the other, there is no APR. Issuers simply expect you to pay off the full balance every month.

High Annual Fees

Charge cards typically come with high annual fees, which can be a drawback for some business owners.

High Late Fees

Because they are not designed to carry a balance from one month to the next, if you fail to pay off your balance by the due date, you will be faced with steep late fees. In fact, those are much higher than credit card late fees, since you have no APR and are supposed to pay off your balance every month. 

Perks and Rewards

Like credit cards, charge card providers can give their users access to perks and rewards such as travel and hotel vouchers. Some of them even include private event invitations. 

This makes them a great option for business owners to cover their business expenses while earning amazing benefits.

Selective

Unlike credit and debit cards, which are accessible to most individuals, charge card issuers are very selective with who they approve. 

Because there is no preset spending limit, your business must be in great financial health with a good payment history to be approved for a charge card. In fact, you’ll often need to have a personal or business credit score that is “good to excellent."

How to Use a Charge Card

A charge card can be used similarly to a credit card. It can be used at most retailers to make a purchase. However, keep in mind that you may be subject to a daily spending limit and you’ll need to be comfortable paying off any and all charges by the end of the term.

Is a Charge Card a Type of Debit Card?

One of the most common questions that business owners ask is: Is a charge card a debit card? Not quite. 

Debit cards are directly connected to your account and withdraw money as you make purchases. Charge cards allow you to borrow money to pay for purchases, but you’ll need to pay them off at the end of the term.

Why Should You Get a Charge Card for Your Business

Why get a charge card for my business? Should I just stick to debit and credit cards to cover expenses? Let’s dive into the details.

Benefits of a Charge Card

There are 3 main benefits of a charge card:

However, charge cards also come with some downsides.

Reasons a Charge Card May Not Be Right for Your Business

Some things to think about when you’re deciding whether a charge card may be right for your business include:

If you aren’t comfortable with the terms above, you may need to pursue another option or build your credit before you move forward with a charge card.

Which Is Better: A Charge Card or a Credit Card?

Neither one is strictly better than the other. The best choice for you will depend on your overall financial health and what you are trying to accomplish.

If your credit score is high and you just want to build on it even more, avoid interest, and access some awesome rewards and perks for your business, a charge card may be a good fit for you.

If you prefer a line of credit that you can pay off over time without having to pay high annual fees, then you may want to stick to a credit card or apply for a business loan.

Can a Charge Card Help You Build Your Credit Score?

A charge card is a good way to build your business credit score because it requires discipline. Since you have to pay off your balance at the end of the month, you’ll have to be diligent to avoid spending more than you have in your checking account.

As long as you pay on time, it doesn’t matter how much you spend. Regular payments will automatically help you to improve your score.

How Do You Get a Charge Card?

Once you find the right charge card, all you need to do is fill out an application on the card issuer’s website with your information. 

Choosing the Right Charge Card

There are a few options to choose from when it comes to charge cards. You may want to take a look at some of their main features and types of rewards your business will get with each of them.

Charge Card Examples

Here are some examples of charge cards you can choose from:

  • American Express® Gold Card

  • American Express® Green Card

  • Platinum Card® from American Express

The best card for your needs will depend on what you spend the most money on for your business. If you travel a lot, the Platinum Card should definitely stand out for you with its great travel rewards.

If you go on a lot of business lunches and dinners, the Platinum Card offers great vouchers for dining.

The Green Card doesn’t offer as many rewards as the others, but it’s a great alternative if you don’t want to pay expensive fees. It’s simply a cheaper option.

Can’t Make Up Your Mind Yet?

If you’re still hesitant about whether you should get a charge card, you can always ask a professional who can take a look at your financial health and guide you in the right direction. 

Need funding to grow your business? Get loan offers that meet your specific business needs from several funders through Fundid Capital. Complete your application in as little as 15 minutes and work with a Fundid Advisor to pick the solution that works best for your growth goals. Explore your options

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About Fundid

Fundid is driven by a mission to empower business owners on their growth journeys by simplifying business finance & access to capital. 

We spend our time thinking about what the world would look like if the 80% of businesses that have under 10 employees had access to the capital they needed to grow and thrive. We're solving this with our Business Capital, Business-Building Card, and Resources that include our business Grant Match Program.

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