Business Charge Card Vs Credit Card: Full Review

Manage your business expenses in the best way for your business.

Updated: May 21, 2024
Matt Crabtree

Written By

Matt Crabtree

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Business expenses can soon accumulate. Such costs can be financed using either a business charge card or a business credit card, allowing your employees to pay for expenses in advance.

However, which financial product is best for your business? Business credit cards can allow you to pay the balance slowly, yet interest is typically charged. Business charge cards will cost you less in fees, although you will need to pay the balance in full every month.

In this article, we will compare business charge cards and business credit cards, helping you to manage your business expenses in the best way for your business.

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What Is a Business Charge Card?

Charge cards are used to make business purchases, usually purchases that the business will pay for at a later date. Your charge card will come complete with a spending limit and sometimes an annual fee.

However, the balance of the charge card must be paid in full every month, or in line with the stated payment period of the provider. Charge cards are a good method to use to monitor and manage expenses in your business.

What Is a Business Credit Card?

A business credit card is like a traditional personal credit card that you may have used previously with personal credit cards.

Credit cards are popular with businesses and the individual, with £80.5 billion of card transactions occurring per year.

However, a business credit card is to be used to pay for business expenses, to help manage the business’s cash flow or to make a substantial purchase.

Business credit cards work to provide a credit limit to the business. Purchases can be made on the company credit card and interest may be applied. Most credit cards will allow the business to pay the balance in instalments.

Business Charge Cards and Business Credit Cards: The Similarities

There are several similarities between a business charge card and a business credit card.

Monitoring Expenses

Using either a charge card or a credit card in your business can help you to monitor expenses. You can view the purchases made on either card and make important business decisions as a result.

Cash Flow Management

Manage the money that flows into and out of your business using either a charge card or a credit card. Many cards allow you to set limits and purchase controls so you can prevent overspending and protect against fraud vulnerabilities.

Fees

Almost every charge card and credit card will charge some form of fee. A charge card may require an annual fee, whereas a credit card may charge interest for every purchase made.

Rewards

Many charge cards and credit cards will offer rewards or benefits for the recipient, such as rewards points or discounts for some retailers.

Late Fees

Both charge cards and credit cards will impose late fees if you do not pay your repayment on time. A charge card will require the balance to be paid in full each month before late fees are charged, whereas a credit card will charge a late fee if the minimum payment is not met on time.

Business Charge Cards and Business Credit Cards: The Differences

Whilst both a business charge card and a business credit card offer similarities in benefits to your business, there are some distinct differences to be aware of.

Spending Limits

A credit card will always have a limit that cannot be exceeded unless the credit card provider grants higher credit limits. However, most charge cards will not impose a pre-set limit, providing that the balance is paid in full each month.

Payments

A charge card balance must be paid every month in full or else a late fee will be charged. On the other hand, a credit card will usually allow the business to pay the balance in instalments as long as the minimum payment is paid on time.

Interest

Many charge card providers will not charge interest to businesses and will impose an annual fee instead. In contrast, a credit card will usually charge interest against every purchase made, unless you have secured a 0% interest credit card as an introductory offer.

Credit Scoring

Using a business credit card will affect your credit score as you have taken out credit against your business. However, whilst a business charge card does have some impact on your credit score, there is a substantial difference.

Consumer Credit Act

A credit card for your business is covered by the Consumer Credit Act. However, just like a debit card, a business charge card is not covered by the legislation.

What Happens If a Charge Card Balance Is Not Paid in Full?

If a charge card balance is not paid in full by the specified date, you will incur a late penalty fee and accumulated interest charges. Ultimately, your charge card could be cancelled by the provider, leading to a negative impact on your business reputation.

Can I Apply for a Charge Card and a Credit Card?

Your business can apply for both a charge card and a credit card from the same or different providers, although the success of both applications will depend on your credit score and business finances.

The benefit of securing both a business charge card and a business credit card is that you will have the flexibility to use which card you think is more suitable in that instance. 

If you need to make a big purchase for equipment that you will not be able to pay for within a month, you could use your credit card so you can pay for the purchase over time.

However, if you need to purchase stock that can be paid for within a month, use your business charge card instead, saving on interest.

Can a Business Credit Card Affect My Credit Record?

As soon as you make an application for a credit card, a record is maintained in your credit history. The credit limit that you are issued with by the credit card company will be recorded on your credit history as a debt, even if you have not yet used your credit card.

How Do I Pay My Charge Card Balance?

The full balance of your charge card will be deducted from your business bank account by the card issuer on the date they have specified. You can also choose to have your monthly or annual fee for using the charge card taken out of your account in the same way.

Charge Card Pros and Cons

Here is a quick look at the pros and cons of using a charge card in your business:

Pros

✔️ Buy now, pay later: Make those much-needed purchases for your business.

✔️ No interest: Most charge cards will not charge an interest on purchases and will require an annual fee instead.

✔️ Distribute to employees: You could obtain an unlimited number of charge cards to distribute to employees.

✔️ Less checks: It is easier to secure a charge card than a credit card and it will leave less impact on your credit history.

Cons

❌️ Charges: An annual fee will be charged to use a charge card.

❌️ Paying the balance: You must pay the full balance of the charge card each month.

❌️ Payment dates: You will be given a set number of days to pay the full balance, which is usually around one month.

❌️ Late fees: Late fees are charged if you do not pay the full balance by the payment date.

Credit Card Pros and Cons

For an overview of credit card pros and cons, look no further than this section:

Pros

✔️ Buy now, pay later: Make those much-needed purchases for your business.

✔️ No annual fees: Credit cards will not charge you an annual fee to use the card.

✔️ Pay in instalments: You do not need to pay the full balance and can pay in instalments.

✔️ Low interest: You could secure an interest-free credit card for your business, or a credit card with low interest.

Cons

❌️ Interest: Some credit cards charge a vast amount of interest which can accumulate drastically.

❌️ Debt: It is easy to fall into a debt cycle when using a credit card.

❌️ Difficult to obtain: The success of your credit card application will depend on your credit score and business reputation.

❌️ Prone to misuse: Fewer restrictions on a credit card can lead to misuse and fraud vulnerabilities. 

Business Charge Card Vs Credit Card: The Verdict

Both charge cards and credit cards can offer your business benefits, ensuring that you can make those essential purchases now and pay for them later. There is a place for charge cards and credit cards in the business industry and which one to choose will depend on your business needs and requirements.

You will be expected to pay the full balance of the charge card after one month, or by the date specified by the provider. This payment method is best suited to businesses who need to purchase stock now and then pay for the stock once they have received customer payments.

A business credit card will allow you to pay smaller amounts off the credit card balance, although you will be charged interest and will pay more to the provider in the long term than with a charge card. This payment method may be best suited to a general retailer business that needs to make irregular purchases with a credit card.

Related Guides:

FAQs

How does a business credit card work?

Can I use a business credit card abroad?

Will a business credit card affect my personal credit score?

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