What is a Business Charge Card?

Using a charge card for business purposes could increase your company's cash flow and earn valuable benefits.

Updated: May 20, 2024
Matt Crabtree

Written By

Matt Crabtree

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Looking for the most effective method of controlling company costs? Several alternatives exist, including corporate credit cards and charge cards. You should seek out anything that meets both your convenience and your budgetary needs.

Credit cards are the topic of this guide. We'll go through how they work and the main benefits and drawbacks to think about.

Consider these points when you consider whether or not this solution meets your requirements.

Let's go in right now.

What exactly are corporate credit cards?

With a charge card, your company could be able to make larger purchases with a variable spending limit.

Als, better manage its cash flow thanks to a longer payment grace period of up to 54 days. When using a Charge Card, there is no predetermined restriction on how much money may be spent, but the whole amount must be paid in full at the end of each billing cycle. 

Although there are no hard spending limits on Charge Cards, you still won't be able to charge as much as you'd want. However, your business may build credit and increase its spending limit over time.

What is a business credit card, by comparison?

Credit cards let you spread out your payments, which is great for your company's cash flow. Your company's monthly credit card spending is capped at a certain amount. 

Your card's credit can be increased up to the maximum amount you request. You may either pay off your credit card amount in full every month to avoid interest or carry a balance and incur interest costs.

Using a credit card has its perks… 

Among the many advantages of company credit cards are the following:

✔️ No interest.

✔️ Debt is impossible to incur since the monthly sum must be paid in full.

✔️ Added bonuses, reductions, and advantages.

✔️ High or uncapped expenditure.

And consequences 

Let's have a look at some of the disadvantages:

❌ Costly renewal charges.

❌ Fees for making a payment late are sometimes more than the interest rate on business credit cards.

❌ Lack of Section 75 protection for purchases.

❌ It's not possible to pay with any credit card anywhere.

❌ Your company's credit rating may suffer as a result of late payments.

How business charge cards work…

A company credit card can provide access to short-term, interest-free capital.

A business charge card functions similarly to a credit card, but often has greater limits that may be used for more substantial expenditures.

A charge card's balance must be paid in full every month; unlike credit cards, it cannot be carried over to the next billing cycle. The upside is that you won't have to worry about falling into debt.

However, this requires that your business have the capacity to pay off the outstanding sum in full at the end of each payment cycle, which is normally between 25 and 51 days.

While there is no interest to pay on a charge card, there is a fee if the amount is not paid in full each month. This is typically far greater than the interest rate you'd get with a credit card. Your credit score may take a hit if you pay late.

Many business charge cards also provide a wealth of additional bonuses and incentives on top of those previously mentioned. This may include:

  • Insurance for trips
  • Lounge privileges at the airport
  • Emergency rerouting
  • Invitations to shows
  • Personal assistance
  • Cashback
  • Savings strategies for businesses such as discount and reward programmes

BIn exchange, you'll have to shell out a yearly charge, maybe £100.

To what ends might a company credit card be put to use?

Everything from business meals and lodging to bills and office supplies and equipment can be paid for using a credit card. 

Employees can use their own credit cards for company-related purchases. You can monitor employee spending by using the expenditure monitoring tools offered by certain service providers, and you can even establish individual spending restrictions for each employee.

Your business charge card may be used at merchants that accept charge cards, as well as online, at ATMs, and over the phone. They can be used internationally for a charge.

Business credit cards vs. charge cards

There are several key variations between business charge cards and business credit cards, despite their functional similarities.

To begin, a charge card does not provide a revolving credit line. If your debt is paid in full each month, no interest will be assessed.

A credit card allows you greater freedom since you may roll over a debt from one month to the next. You may return your credit card balance each month in whatever amount you choose, as long as it's at least the minimum payment due as shown on your billing statement. Unless you have a 0% interest promotion, interest will be added to your debt if you don't pay it off in full.

Credit cards, in contrast to charge cards, provide a spending cap in the form of a credit limit. This will range from a few hundred to a few thousand GBP depending on your credit score and salary.

When considering whether a charge card or a credit card is preferable for your company, it is crucial to consider these distinctions.

Lastly, know that purchases made using a business charge card or credit card are not covered by Section 75 of the Consumer Credit Act. Business credit cards are exempt from this rule.

Alternatively, your business credit card issuer may provide purchase protection insurance, albeit the limits of coverage may be smaller and an excess may apply. Theft and unintentional damage are often the sole insured perils.

Verdict: What is a business charge card?

Understanding how business charge cards vary from business credit cards is vital if you want to use one to your company's advantage. Importantly, unlike with a credit card, you can't roll over an amount into the next billing cycle if you don't pay it off in full by the end of the billing cycle.

Is there anything more to do?

A business credit card is a common substitute for a business charge card. These may give you more leeway than a credit card, and many even come with bonuses like incentives and money-management apps. You can carry over a debt from month to month, unlike with a business charge card, but interest will be charged, so the cost might add up fast.

Alternatively, you might get a prepaid or debit card for your company and use it instead of cash. There is no revolving line of credit with either choice, but you may still issue cards to staff.

Related Guides:

FAQs

How does a charge card work?

How are Charge Cards distinct from Credit Cards?

Do company credit cards affect personal credit?

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