Compare business charge cards

What are business charge cards and how do they work?

A business charge card offers short-term, interest-free funding. You can use a business charge card in the same way as a credit card, but they tend to offer higher spending limits, making them useful for large purchases.

The balance must then be repaid in full each month – you cannot carry it over from month to month as you can with a credit card. The advantage of this is that there’s no risk of you getting into debt. But this also means your organisation must have the financial stability to clear the balance each billing cycle, which will typically be between 25 and 51 days.

Although there is no interest to pay with a charge card, if you don’t pay off your balance in full each month, you will be charged a fee. This can often be higher than the amount of interest you would be charged on a credit card. Late payments can also have a negative affect on your credit rating.

You can use a charge card to pay for business travel, office supplies and equipment, as well as give your employees their own charge card to pay for work expenses. Some providers even allow you to set different spending limits for each employee, and offer expense tracking tools to help you monitor what your employees are spending where.

Business charge cards can also offer a host of benefits and rewards, including travel insurance and access to airport lounges – particularly useful if you or your employees regularly have to travel abroad for meetings. Others offer reward and discount schemes to help your business save money.

In return, you will usually need to pay a hefty annual fee – often £100 or more.

Business charge cards benefits

There are several benefits to using a business charge card, including:

• No risk of getting into debt
• Rewards and benefits often included
• High spending limit
• No interest to pay
• Can help businesses monitor employee spending

Business charge cards drawbacks

Of course, there are also a number of drawbacks that you’ll need to consider if you’re thinking of applying for a business charge card. These include:

• Annual fees can be high
• You must repay the balance in full each month
• High late-payment fees
• Not accepted everywhere
• No Section 75 purchase protection

Charge cards vs business credit cards

Although business charge cards work in a similar way to business credit cards, there are some important differences.

For a start, there is no line of revolving credit with a charge card. You must pay off your balance in full each month and no interest will be charged as a result.

With a credit card, you can carry over the balance from month to month, making it a more flexible option. Credit cards enable you to choose how much you want to repay each month, provided it is at least the minimum monthly amount printed on your statement. If you don’t pay off the amount in full, interest will usually be charged on the remaining balance, unless you have taken advantage of a 0% deal.

Unlike charge cards, credit cards also come with a credit limit, which is effectively a limit on the amount you can spend. This will be based on your credit score and income and can vary between a few hundred to a few thousand pounds.

Another key difference is that credit cards offer purchase protection under Section 75 of the Consumer Credit Act. This means that if you buy something costing between £100 and £30,000 and something goes wrong, your credit card provider is jointly liable with the retailer and you should get your money back.

Charge cards do not offer this protection. In some cases, your provider may offer purchase protection insurance instead, but cover limits are likely to be much lower and you will usually have to pay an excess to claim. You will also typically only be covered for theft and accidental damage.

It’s important to weigh up these differences when deciding whether a charge card or credit card would be better for your business.

Frequently asked questions

• What is the spending limit on charge cards?

  Charge cards often have high or no preset spending limits. However, this doesn’t mean your spending limit is unlimited. It will usually change depending on your payment history and credit record.

• Are business charge cards difficult to get?

  Only a few providers offer business charge cards. American Express is one of the biggest charge card providers. To qualify, you’ll usually need a good credit score and there may be a minimum annual business turnover requirement.

• Do business charge cards impact your credit score?

  Yes, they can. If you make all of your repayments in full and on time, a charge card can have a positive impact on your credit score. However, if you miss payments, your card provider can report this to the credit reference agencies, and this may have a negative impact on your credit score.

• What are the alternatives?

  One of the most obvious alternatives to a business charge card is a business credit card. These can offer more flexibility than a charge card and many also offer rewards and other perks, including tools to manage your cash flow and track your finances. The downside is that if you can’t pay off the balance in full each month, interest will build up and this can quickly become expensive.

  Another option is to open a business bank account and use the business debit card or prepaid business card that comes with the account. Both options allow you to give cards to your employees and, like a charge card, there is no revolving line of credit.