Charge Cards For Business

Table of Contents

Should I get a charge card for my business?
What’s the difference between a business credit card and a business charge card?
How to use a business charge card
Key considerations when you compare business charge cards
Am I eligible for a business charge card?
Pros and cons of business charge cards
How to apply for a business charge card
Alternatives to a business charge card
Charge Card FAQs

When used correctly, business charge cards can help your business manage large payments – and because they have to be paid off in full each month, charge cards don’t incur interest or harm your credit utilisation ratio.

Should I get a charge card for my business?

Business charge cards are plastic cards that look like business credit cards and can be used to make purchases in a very similar way.

With a business charge card, you must pay off your purchases at the end of an extended payment period, which could be up to 54 days. For this reason, charge cards are best suited to businesses that already have strong cash flow.

Charge cards can also be useful if you want to give your employees expense cards without opening new lines of credit.

And because charge cards must be paid off in full each month, you won’t be charged interest for using one. Nor will you have a pre-set spending limit. Instead, you will have a variable spending limit which changes as you use the charge card. Charges will be approved based on what you’ve shown you can afford, your credit record, and your financial situation.

What’s the difference between a business credit card and a business charge card?

Charge cards look like business credit cards and function in the same way to make purchases. They often have some of the same features as business credit cards, including rewards and perks.

But unlike credit cards, charge cards must be paid off in full each month. Therefore, they don’t have 0% interest promotions and they’re not an option for balance transfers. If you need either of these features, a credit card may be a better fit for your business than a charge card.

While credit cards usually come with a pre-set spending limit – which caps how much credit you can access at any one time – charge cards traditionally don’t have pre-set limits.

This does not mean, however, that you can spend without restrictions on a charge card. Charge cards still have limits – they just change automatically based on your usage of the card and your circumstances.

If you get a charge card, you can usually check your limit with an app or use the card issuer’s website to find out in advance whether a purchase will be approved.

Since you aren’t accessing a line of credit with a charge card, you won’t be charged interest for using one.

Instead, you are required to pay off every penny you’ve spent on the card by the end of each billing period. If you don’t, expect to be slapped with late fees.

You usually need to pay an annual fee to access a charge card. With credit cards, some providers charge lower fees, while other cards are free to take out. Much of this will depend on your card provider.

How to use a business charge card

In practice, you can use your charge card in much the same way as a credit card – so long as you pay off the balance in full every month.

You can use a charge card in many shops and restaurants, as well as online, over the phone and overseas. If you pick a charge card with rewards, you can earn reward points as your business spends.

An advantage of charge cards, compared to credit cards, is the effect on your business’s credit utilisation ratio. This is a measure of how much credit your business is using, as a proportion of your total available credit. If your credit utilisation ratio is high, this can harm your business credit score.

Because charge cards don’t have pre-set credit limits, you can make large, one-off purchases without harming your credit utilisation ratio. For this reason, you could use a charge card to meet large and unexpected expenses without having to worry about the effect on your business credit score.

Key considerations when you compare business charge cards

If you do pay off your balance in full every month, charge cards and credit cards really aren’t all that different. The major distinction is that you could have greater spending power with a charge card.

This means you’re probably best off judging the cards on their features and perks, as well as considering which products would be the best fit for your circumstances and your business.

When comparing business charge cards, consider the following factors:

Fees and charges. Just because charge cards don’t have interest, that doesn’t mean they’re fee free. Charge cards generally come with an annual cardholder fee, so be sure to shop around for a card which offers good value.
Offers. Some charge cards may come with special offers – like no annual fees in the first year or bonus rewards. Check which deals are on the market before you pick a card for your business.
Rewards. See what rewards a charge card can offer you for your regular business spending. Pick a card whose rewards align with what you want.
Purchase protections. While business charge cards don’t come with the same robust protections as personal credit cards, you can still benefit from payment protection features like ‘chargeback’ schemes. See what protections a charge card offers before you commit.
Expense management tools: Charge cards are great if you want to give expense cards to your employees without worrying about interest or opening new lines of credit. Check to see what expense management features are included with your charge card if this is how you plan on using it. How many expense cards can you get for free? Can you monitor spending in real time? Can you set spending limits? These could be useful features for your business.

Am I eligible for a business charge card?

Charge card eligibility may vary slightly from one provider to another. However, as a general rule, you may need to meet the following requirements to get a business charge card:

You’ll need to be 18 or older and a UK resident.
You must commit to using the charge card for business purposes only.
You must have authority to borrow on behalf of your business.
Your personal and business credit scores must be good enough to pass a credit check.
You may need a business bank account with your chosen provider, if applicable.
You may need to provide a personal guarantee.

Some providers are willing to issue cards to sole traders and partnerships, while others may only issue cards to limited companies.

Pros and cons of business charge cards

Pros of business charge cards

No preset spending limit: Unlike credit cards, charge cards don’t have pre-set limits on how much you can spend.
No interest charged: Because you’re not technically borrowing money with a charge card, you don’t need to worry about interest.
Rewards and perks: Charge cards can reward your business for regular spending.
Boost your business credit score: Paying off your balance in full each month will help you build your business credit score. Because charge cards don’t have pre-set spending limits, using them for large purchases won’t hurt your credit utilisation ratio either.
Employee expense management: Charge cards can be used as employee expense cards without the need to pay interest or open new lines of credit. Your charge card could also come with various controls and safeguards to help you manage employee spending.

Cons of business charge cards

Late fees: If you don’t settle your charge card balance in full at the end of the statement period, expect to be charged late fees.
Cardholder fees: It’s common for the cardholder to be charged an annual fee.
Credit score requirements: You’ll need to have a good business credit score before you can access a charge card.
Less repayment flexibility: Unlike business credit cards, the balance on a charge card must be settled in full each month. This makes them less flexible than credit cards.

How to apply for a business charge card

If you want to apply for a business charge card, start by researching the various charge cards on the market to find the one which is the best fit for your business.

Once you’ve settled on a card, you should be able to apply directly to the charge card provider using their website.

Different providers have different eligibility requirements which you must meet if you want to be accepted for a business charge card.

Be warned that your business credit score will be checked as part of your application. If your business credit score is too low, you may not be approved for a business charge card.

You should also know that if you make multiple applications over a short period, the so-called ‘hard’ credit checks carried out by lenders can temporarily hurt your business credit score. Try to avoid making repeated applications in a short period of time to minimise the impact of these searches.

Alternatives to a business charge card

If you’re not certain whether a charge card would be right for your business, you can always consider the following alternatives:

Business bank accounts may come with overdraft facilities that allow you to borrow money in the short term (in return for paying an arrangement fee).
Business credit cards offer more flexibility than charge cards, but you will be constrained by pre-set credit limits and will have to pay interest on balances that aren’t cleared at the end of each statement period.
Business loans or start up business loans could allow your business to access more capital over a longer period, although you’ll have to pay it all back with interest.
Invoice financing can free up some of the cash tied up in your unpaid invoices, allowing you to quickly inject capital into your business or cover an unexpected cost. Just be warned that with invoice financing, your business will get less money in the long run than if you simply wait for your customers to pay.

Some business charge cards come with rewards. As you make eligible purchases, you’ll earn reward points which can be redeemed for things like business travel, employee perks, or money off your statement.

It’s common for business charge cards to have a cardholder fee. This is usually paid annually, although certain providers may give you the first year for free.

Most places that accept credit cards will also accept business charge cards. You can also use charge cards to spend online, over the phone, or overseas.

When you sign up for a business charge card, you may be able to get a certain number of employee cards for free. Just know that you’ll still be the main cardholder, and whatever your employees spend on their cards will be linked to your account.

If you don’t settle your charge card balance in full each month, you’ll be charged late fees. This will almost certainly hurt your business credit score as well.

Some charge card providers only accept applications from the directors of limited companies, but that’s not to say that sole traders and freelancers can’t access cards. The requirements vary between providers, but if you shop around, you should be able to find a charge card that suits your needs – regardless of the size of your business and how it’s structured.

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