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

If used responsibly, a charge card could be extremely useful for small businesses as it offers convenience, flexibility and access to a credit limit with 0% annual percentage rates (APR). In this guide, we'll talk all about how business charge cards work and why they're beneficial, which will help you determine whether it’s right for your small business.

What Is a Business Charge Card?

A business charge card is a credit card that can be used to make business-related purchases. The cardholder is responsible for paying the balance in full each month. Business charge cards can be a helpful tool for businesses of all sizes, as they can help manage cash flow and expenses, without accruing interest or fees when the balance is paid off in full at the end of the billing cycle. 

Common Features of Business Charge Cards

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

0% Annual Percentage Rates

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

Higher Credit Limits

Business charge cards typically offer higher credit limits than a personal credit card. If you are still using your personal credit card for your business expenses, a business charge can help you start to separate your personal and business finances. 

Late Fees

Because business charge cards are designed be paid off in full each billing cycle, if you fail to pay off your balance by the due date, you will be faced with late fees. The late fee will vary by each card. 

How to Use a Business Charge Card

A business 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 spending limit and you’ll need to be comfortable paying off any and all charges by the end of the billing cycle.

Is a Business Charge Card a Type of Debit Card?

One of the most common questions that business owners ask is: Is a business charge card a debit card? The answer is no - they are two different types of cards. 

Debit cards are directly connected to your checking account and withdraw money from that account as you make purchases. Charge cards allow you to borrow money to pay for purchases, and then pay the card off at any point during, but you will be required to pay your balance in full at the end of each billing cycle. 

Why Should You Get a Charge Card for Your Business

Having a business charge card provides business owners with a convenient and powerful tool for managing their finances. With a single card, expenses can be quickly tracked and organized which makes preparing accounting records faster and easier.

Furthermore, having a business charge card can help promote cash flow because you are required to pay your balance off in full at the end of your billing cycle versus carrying a balance and accruing interest.

Additionally, small businesses that have limited access to credit or lines of credit can often qualify for business charge cards sooner than other funding options. 

Why a Business Charge Card may not be Right for Your Business

A business charge card can be a great way for businesses to manage their expenses, but it's important to consider the potential drawbacks. If you are looking to carry a balance month-to-month, a business charge card might not be the best option to support your growth. Business charge cards require that the balance is paid in full by the end of the billing cycle in order to avoid late fees, which is why they have a 0% APR.  

Which is Better: A Business 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 your business is trying to accomplish.

Each card option carries its own unique benefits; a charge card is ideal for businesses focused on short-term growth as it requires customers to pay off the entire balance after each billing cycle, thus keeping expenses under control. Business charge cards can be a great option for small businesses that are looking for an on-ramp to accessing credit and additional capital. 

 

Conversely, a business credit card works best for businesses that might not be in a position to pay their balances off in full. With a business credit card you can keep an open balance and spread payments over time while accruing interest on the unpaid balance, which can add up. With careful planning, your business can have access to both forms of payment to allow you to manage cash flow in the most efficient way possible.