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Update: Some offers mentioned below are no longer available. View the current offers here – The Business Gold Rewards Card from American Express, Capital One Spark Miles for Business
Business cards can be a great way to amplify your travel rewards strategy, netting you high sign-up bonuses, earning bonus points on various types of purchases your personal cards do not, and offering perks both travel-related and otherwise that can help you meet your travel goals. All while keeping your personal and business expenses separate.
At this point, many rewards cards, both personal and business ones, tend to be credit cards. However, some of the most popular business cards out there are charge cards. While many people use the terms “credit card” and “charge card” interchangeably, the two are, in fact, very different products.
Understanding how credit cards differ from charge cards can be extremely important, both for determining which kind of product might be right for your business, and how to be responsible about using it.
Here is an overview of credit cards versus charge cards and why one or the other might be better for your needs and your points portfolio.
How Credit Cards and Charge Cards are Alike
Before we get into the differences, let’s start with how credit cards and charge cards are the same. Both are basically lines of credit extended to you by a financial institution. You use your personal credit history and score to apply for either.
You can charge purchases to either type of card, and each acts like a short-term loan from your issuer. You are then expected to pay back the amount you charge each month at the end of your billing cycle.
Credit cards and charge cards both might also offer rewards points or miles based on your purchases as well as other benefits, and both tend to come with costs such as annual fees, late fees and foreign transaction fees.
In short, the two types of cards look very similar, but are not quite the same.
The Differences Between Credit Cards and Charge Cards
There are two major differences between credit cards and charge cards. The first is that credit cards typically let you carry a balance from month to month whereas charge cards do not. The second is that credit cards tend to have preset spending limits while charge cards do not. Now, let’s get into the specifics.
Carrying a Balance
In terms of balances and billing cycles, when you use a credit card for purchases, you are sent a statement at the end of each billing month that will show you your total balance and a minimum amount due that is generally a small percentage of that balance. You can pay any amount between the two numbers and carry the rest as a balance. However, you will accrue interest fees on whatever balance you carry. As long as you pay the minimum each month and don’t come near your total spending limit, though, your issuer should keep your account open and consider it in good standing.
With a charge card, you must pay off your statement in full each month. If you do not, the issuer will charge a late fee (typically 3% of your balance) and might prevent you from making further purchases on the card until your balance is paid off in full. Charge cards do not have interest fees since you are not allowed to carry balances, and you cannot take advantage of balance transfers either to or from your account. Some charge cards do now offer a “pay over time” feature that acts sort of like a credit card, though, with finance charges based on your time frame.
Because charge cards do not earn financial institutions money on interest fees, they tend to have higher annual and other fees.
When you apply for a credit card, a financial institution assesses your creditworthiness and extends you a line of credit with a set maximum beyond which you cannot make purchases. This is important because one of the most significant factors used to determine your credit score is your ratio of debt to credit.
When you make more purchases with your card, the amount of debt goes up in comparison to your overall credit limit and thus can lower your score over time. And remember, you are usually using your personal credit to guarantee a business credit card. So the activity on your business credit card can impact your personal credit score.
By contrast, charge cards do not have preset spending limits. That’s not to say you can charge any amount you want on them at any time, nor that there are no limits whatsoever. Rather, this is intended to give cardholders the flexibility to make large purchases without requiring prior authorization or having to undergo further credit checks to increase their line of credit.
Card issuers also tend to put some limits on their cardholders’ spending that can then be adjusted based on purchase habits and changing financial situations. Because there are no conventional credit limits on charge cards, though, your activity with them tends not to have the same impact on your credit score that using a credit card would.
Before you go making large purchases on a charge card, however, remember that your activity will still impact your overall credit score as issuers take other factors such as credit history and payment history into account.
Which Type of Card is Right for You?
Which type of card is right for you depends on your needs and habits. Generally speaking, it’s easier to apply and get approved for a credit card, so those just starting out with their credit history should opt for a credit card. Charge cards usually require applicants to have very good to excellent credit in order to be considered.
It’s also easier to get a credit card due to the fact that there are just a lot more of them out there. American Express is pretty much the only major US issuer of charge cards these days, while the other major banks all field business credit cards. So if you already have lines of credit open with Amex, you might want to look for options at other banks, and thus your main choices will be credit cards. Non-Amex cards tend to be more widely accepted abroad than those issued by American Express, too. So if you travel a lot, you might want to have another option in your wallet.
Likewise, if you know you’re going to need to carry balances month to month, a credit card will give you the flexibility to do so. Plus, having preset limits might help you keep better track of your spending habits.
On the other hand, if you are able to pay off your balance in full each month and want the flexibility of being able to make large purchases without preset limits from time to time, a charge card might be a better choice for you.
Also note that American Express limits you to a maximum of five open credit cards per person, much like Chase enforces its 5/24 rule. However, Amex does not seem to have set limits on the number of charge cards one consumer can carry, so applying for them instead of credit cards could be a good way to keep earning welcome bonuses and racking up points on spending. Always responsibly, though!
Now that you know how credit cards and charge cards compare, here are a few current business options you might want to consider. You can always check out TPG’s updated listings of the best travel rewards cards currently available, too.
There are myriad options when it comes to great business credit cards. Here is just a handful of the top ones.
Ink Business Preferred Credit Card: This card currently offers a sign-up bonus of 80,000 Ultimate Rewards points after you spend $5,000 in the first three months. Cardholders earn 3 points per dollar on the first $150,000 spent on travel, shipping, social media advertising and internet/cable/phone services each account anniversary year, plus 1 point per dollar on everything else. This card also offers cell phone insurance when you use it to pay your (and your employees’) cell phone bill, and primary rental car insurance. You can get employee cards at no additional cost, and there are no foreign transaction fees. The annual fee is $95. Read the full card review here.
Starwood Preferred Guest® Business Credit Card from American Express: The welcome bonus is 75,000 points after you spend $3,000 in the first three months. Earn 6 points per dollar at Marriott and SPG properties; 4 points per dollar at US restaurants and gas stations and on wireless telephone services purchased directly from US service providers and on US purchases for shipping; and 2 points per dollar on all other purchases. Receive one free award night every year after your account anniversary good for stays costing up to 35,000 points. Enjoy complimentary Silver elite status in the new Marriott Rewards program and Gold status if you spend $30,000 within the calendar year ($35,000 starting in 2019). The $95 annual fee is waived the first year.
Southwest Rapid Rewards Premier Business Credit Card: Earn 60,000 Rapid Rewards points when you spend $3,000 in the first three months. Get 2 points per dollar on Southwest purchases and Rapid Rewards hotel and car rental partner purchases; 1 point per dollar on everything else. Anniversary bonus of 6,000 points and 1,500 Tier-Qualifying Points toward elite status for every $10,000 you spend annually, up to 15,000 TPQs. $99 annual fee.
Gold Delta SkyMiles® Business Credit Card from American Express: A great choice for Delta flyers, this card currently earns 30,000 SkyMiles when you spend $1,000 in the first three months, 2 miles per dollar on Delta purchases and 1 mile per dollar on everything else. Airline benefits include a first bag checked for free (maximum nine waivers per reservation), Zone 1 boarding and 20% off in-flight purchases on Delta flights. The card does not charge foreign transaction fees and its $95 annual fee is waived the first year.
Capital One Spark Miles for Business: Score 50,000 miles after you spend $4,500 in the first three months. Earn 2 miles per dollar on all purchases, no foreign transaction fees and free additional cards for employees. $95 annual fee waived the first year.
Ink Business Cash Credit Card: Earn $500 cash back after you spend $3,000 in the first three months. Also earn 5% cash back on the first $25,000 spent in combined purchases each account anniversary year at office supply stores and on internet, cable and phone services. Get 2% cash back on the first $25,000 spent in combined purchases each account anniversary year at gas stations and at restaurants. Get an unlimited 1% cash back on everything else. This card does not have an annual fee.
As mentioned, there are far fewer charge cards to choose from, but there are still some really excellent ones worth considering.
Business Platinum® Card from American Express: Earn 50,000 Membership Rewards points after you spend $10,000 in the first three months and an extra 25,000 points after you spend an additional $10,000 also within the first three months. This card’s annual fee is $450, but it carries benefits like earning 5 points per dollar on airfare booked through Amex Travel, access to Centurion, Priority Pass and Delta Sky Club (when flying Delta) lounges, an annual $200 airline fee credit, Global Entry or TSA PreCheck application rebates and a 35% points rebate on first- and business-class redemptions through Amex Travel. Read the full card review here.
Business Gold Rewards Card from American Express: Earn 50,000 Membership Rewards points after you spend $5,000 in the first three months. Get 3 points per dollar on one category of your choice from a list of five options and 2 points per dollar on the four remaining categories, on up to $100,000 in purchases in each of the five categories each year, then earn 1 point per dollar on all purchases. The bonus categories include things like airfare, US advertising, US shipping, US gas station and US computer purchases. This card waives foreign transaction fees. Read the full card review here. The annual fee of $175 is waived the first year.
The Plum Card® from American Express: Earn up to $600 cash back — earn a $200 statement credit after each $10,000 you spend in purchases on the card, up to $30,000, within the first 3 months of cardmembership. This card’s benefits includes waived foreign transaction fees and no-fee additional employee cards. But more importantly, you get a 1.5% discount for making early payments (within 10 days of your statement closing date), and it allows you to take up to 60 days to pay off your balance with no interest if you pay your minimum due (10% of new purchases). The card has a $250 annual fee that is waived the first year.
The information for the The Plum Card from American Express offer above has been collected independently by The Points Guy. The card details on this page have not been reviewed or provided by the card issuer.
Getting a business card can help you maximize your spending and meet your travel goals. Whether a credit card or a charge card is the right choice for you, however, will depend on your spending and payment habits, your credit score and history, and what kinds of purchases you need to use your card for.
Once you understand the differences between the two types of products, through, there are plenty of great choices in each category. In the meantime, check out these posts for more information.
- Maximize Points and Miles When Starting a Business
- Do I Need a Business to Get a Business Credit Card?
- 8 Signs It’s Time to Get a New Business Credit Card
- 5 Steps to Build Your Business Credit
- How to Check Your Business Credit Score
- Which Business Credit Cards Could Affect Your Personal Credit
- 7 Credit Card Rules Every Business Owner Should Follow
- 7 Ways Credit Cards Can Help Grow Your Small Business
- Lesser-Known Perks of Small Business Credit Cards
- Which Business Credit Cards Have The Best First-Year Value
With some great bonus categories, the American Express Gold Card has a lot going for it. The card offers 4x points at US restaurants, at US supermarkets (up to $25,000; then 1x), and 3x points on flights booked directly with airlines or through amextravel.com. It is currently offering a welcome bonus of 35,000 bonus points after you spend $2,000 in the first three months.
- Earn 35,000 Membership Rewards® Points after you spend $2,000 on eligible purchases with your new Card within the first 3 months.
- Earn 4X Membership Rewards® points at U.S. restaurants. Earn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per year in purchases, then 1X).
- Earn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
- Earn up to $10 in statement credits monthly when you pay with The Gold Card at Grubhub, Seamless, The Cheesecake Factory, Shake Shack, and Ruth's Chris Steak House. This is an annual savings of up to $120. Enrollment required.
- $100 Airline Fee Credit: up to $100 in statement credits per calendar year for incidental fees at one selected qualifying airline.
- Choose to carry a balance with interest on eligible charges of $100 or more.
- No Foreign Transaction Fees.
- Annual Fee is $250.
- Terms apply.
- See Rates & Fees