March 5, 2025

Charge card vs. credit card: Key differences

A charge card is a type of payment card that allows the cardholder to spend money before having the funds available in their account, but requires the balance to be paid in full each month. Charge cards are similar to credit cards, but there are some key differences:

Charge cards and credit cards are both forms of cashless payments, but the way you pay them off is different. While credit cards allow you to carry a balance, charge cards must be paid in full every month.

Aside from how payment works, there are a few other differences you should know. In this article, we'll explain how charge cards and credit cards work so you can choose the right card for your business needs.

Charge cards vs. credit cards at a glance

Here's a quick overview of the differences between charge cards and credit cards:

Feature

Credit card

Charge card

Spending limit

Has a preset credit limit

No preset spending limit

Carrying a balance

Allows users to carry a balance from month to month

Requires full balance payments each month

Interest rates

Typically charges interest on balances carried month-to-month

No interest rates since the balance must be paid in full

Fees

May have annual fees, interest fees, and late fees

Often has no annual fee or other fees

Rewards and benefits

Cashback, points, or miles, with perks like travel insurance

Cashback or points as well as vendor discounts

Building credit

Activity is reported to credit bureaus

Payment information is reported to credit bureaus

Flexibility in payments

Allows minimum payments

Full balance must be paid monthly

Suitability

Good for businesses looking to earn rewards and pay off balances over time

Ideal for businesses that value high-end rewards and benefits and can afford to pay off their full balance each month

Approval criteria

Typically requires good credit and a personal guarantee

Usually has no credit check but requires a certain minimum balance in a business bank account

4 key differences between charge cards and credit cards

Now let's take a closer look at the key differences between charge cards vs. credit cards that you should keep in mind.

1. Payment terms

Charge cards offer flexible spending limits, but credit cards provide more flexible payment terms. With a credit card, you only need to make the minimum monthly payment by the due date, even if it’s just a small portion of your total balance. However, any unpaid balance is carried over to the next month and incurs interest charges based on your card’s rate.

This flexibility can make it easy to accumulate debt over time, potentially leading to high interest costs and a negative impact on your credit score. In contrast, charge cards require you to pay the full balance each month, avoiding interest and late fees. For businesses with stable cash flow, this can be an effective way to manage expenses and avoid debt.

2. Spending limits

Credit cards cap the amount of credit available to cardholders each month. Once you reach your credit limit, you’re automatically restricted from making new purchases on the account. Once you pay down some of that debt, then your available credit increases again.

When you’re approved for a card, the issuer determines your credit limit based on your credit score and payment history. If you'd like to raise your limit, you'll have to demonstrate a history of responsible and frequent card use.

Charge cards, on the other hand, don’t have preset card limits. Their spending limit fluctuates (sometimes even monthly) based on factors like:

  • Credit history
  • Monthly spending
  • Liquid assets
  • Historical sales
  • Repayment habits

These flexible limits make charge cards useful for large purchases or multiple purchases in a short timeframe. If a business frequently makes high-value purchases, a charge card may provide more flexibility compared to a traditional credit card with a fixed credit limit.

Though charge cards don't have a preset spending limit, this doesn't mean unlimited spending power. Issuers monitor spending behavior and financial conditions to adjust limits accordingly. Some business owners may find that charge cards allow for larger purchases without requiring prior credit line increases, but this is based on their creditworthiness and payment history.

3. Eligibility requirements

Credit card issuers determine your eligibility based on your credit history. If you have a bad credit score, you'll still qualify for some cards, but they'll usually come with higher interest rates. Having a good to excellent credit score allows you to access the best business credit cards.

Charge cards, on the other hand, evaluate your application based on your company's financial situation. Most providers consider your annual revenue and amount of capital in the bank. So, if you don't have an established business credit history, you can still qualify—as long as your business is bringing in enough profit.

4. Impact on credit score

Credit utilization refers to how much of your available credit you’re using at any given time, expressed as a percentage. Since credit cards come with a preset limit, how much of that credit you use compared to your total available credit will impact your profile. In fact, this factor accounts for a weighty 30% of your FICO credit score.

Keeping your credit utilization low can help improve your credit score. It signals to creditors and credit bureaus that you can use your business credit card—and pay it off—responsibly. Conversely, a higher credit utilization ratio will negatively impact your credit report.

Charge cards generally don’t come with preset limits, so credit agencies don’t factor credit utilization rates into their scoring models. Because of this, making larger purchases with a charge card instead of a credit card can help improve your credit score instead of harming it.

tip
What’s the difference between a charge card and a debit card?

A charge card, often used by businesses for purchasing flexibility, requires the full balance to be paid off each month. This allows for potentially large, short-term spending without interest or late fees. In contrast, a debit card withdraws funds directly from a business’s bank account, providing a straightforward way to manage expenses by spending only what's available.

Business credit cards are often personally guaranteed—the issuer evaluates your personal credit score and reports activity to consumer credit bureaus. If you carry a balance or max out your credit limit, it can negatively impact your personal credit utilization ratio, even if the card is for business use. Charge cards, on the other hand, do not report a credit limit, so they do not directly impact credit utilization.

What is a charge card?

A charge card is a type of payment card that allows cardholders to make purchases with the requirement to pay off the balance in full at the end of each billing cycle. Unlike a credit card, a charge card does not have a preset spending limit, but the issuer may still restrict spending based on the cardholder's creditworthiness and spending history. Since there is no option to carry a balance, charge cards do not incur interest charges, though they can have high late fees and penalties.

Charge cards often come with high annual fees but offer extensive rewards and benefits, such as points, cashback, or travel perks. They are popular among those who prefer premium services, with American Express being a well-known issuer. The lack of a preset spending limit and the requirement to pay the balance in full make them ideal for disciplined spenders who want to maximize rewards without incurring interest.

How does a charge card work?

‍A charge card is similar to a business credit card, except that it needs to be paid in full every month. There’s no option to make a minimum payment and carry your balance to the next month with interest, which some might consider to be a disadvantage.

In addition, charge cards come with expense management software and custom controls to help manage employee spending. You can add rules like merchant restrictions and preset spending limits to enforce your company’s expense policy.

What is a credit card?

A credit card allows users to borrow funds from the issuing bank up to a predetermined credit limit to make purchases or withdraw cash advances.

Credit cards also come with various features and rewards, such as cashback, points, or travel benefits, which incentivize spending. Some offer introductory 0% APR periods on purchases or balance transfers, making them useful for financing larger purchases or consolidating debt. Unlike charge cards, credit cards typically have lower or no annual fees, making them more accessible. However, carrying a balance can lead to significant interest charges, making responsible use crucial for avoiding debt.

How do credit cards work?

Unlike charge cards, credit cards offer the flexibility to carry a balance from month to month. If the full balance is not paid off by the due date, interest is charged on the remaining amount, typically at high annual percentage rates (APRs). Credit cards have set credit limits based on the cardholder's creditworthiness, and going over this limit can result in additional fees or declined transactions.

Should I get a charge card or a credit card?

If your business makes steady money every month, a charge card could work well since it requires paying off the full balance monthly. This can help keep spending in check. On the other hand, if money comes in more sporadically, a credit card might be better since you can carry a balance from month to month, providing some financial flexibility during tighter times.

Expense management is another factor to consider. Charge cards often come with tools that help track and control spending, making it easier to manage business expenses. Credit cards may also have expense management features, but they might not be as comprehensive. The right card can provide valuable insights into your spending, helping to streamline budgeting and financial planning for a small business.

Many small business owners use their personal credit to apply for business cards, meaning that activity on a business credit card can impact their personal credit score. Charge cards, on the other hand, don’t have a preset limit, which means they won’t impact your credit utilization ratio—a key factor in credit scoring.

Best charge cards for businesses

If you think a charge card is right for your business, you have plenty of options. Here's a quick overview of our picks for the best charge cards for small businesses:

  • Ramp Corporate Card
  • American Express Business Gold Card
  • Capital One Spark Cash Plus‍

Ramp Corporate Card

Ramp Business Corporate Card

Annual Fee
$0
APR
N/A
Pros:
  • Offers a comprehensive platform that includes expense management, travel booking, procurement, and accounts payable
  • Unique cost-cutting features and AI-powered savings insights to help businesses reduce expenses
  • No annual, application, or late payment fees
  • Access to over $350,000 in partner rewards and perks from leading companies
Cons:
  • Only available to US-based corporations and LLCs, excluding sole proprietors and unregistered businesses
  • Requires a minimum of $25,000 in a business bank account to qualify
  • Balances must be paid in full each month, which may not provide the flexibility some businesses need for managing cash flow

The Ramp Corporate Card is designed to help businesses streamline spending, optimize expenses, and maximize savings with real-time spend controls and automated expense management.

Unlike traditional business credit or charge cards, Ramp focuses on cost efficiency, offering tools that help companies track and control expenses seamlessly. With built-in AI-driven savings insights, businesses can identify unnecessary spending and uncover opportunities to reduce costs.

One of Ramp's standout features is its cashback rewards program, which can provide businesses with up to 5% in savings on eligible purchases. Additionally, Ramp cardholders gain access to over $350,000 in exclusive partner rewards and discounts from various service providers. Plus, businesses can also issue unlimited physical and virtual cards with customized controls for employees, ensuring spending aligns with company policies.

American Express Business Gold Card

American Express Business Gold Card

Annual Fee
$375
APR
19.49%–28.49%
Pros:
  • High points back rewards
  • No foreign transaction fee
  • Statement credits for Walmart+ and qualifying business merchants
Cons:
  • High annual fee
  • $39 late payment fee or 2.99% of any past due Pay in Full amount, whichever is greater
  • The value of a point varies based on how you redeem the reward

The American Express Business Gold Card offers flexible rewards, automatically earning 4x Membership Rewards® points on the two highest spending categories each month, such as advertising, tech, gas, and medical supplies (up to $150,000 per year). All other purchases earn 1x points, and no preset spending limit provides greater flexibility.

The card has a $375 annual fee, and only select purchases qualify for Pay Over Time.

Capital One Spark Cash Plus Business Card

Capital One Spark Cash Plus Business Card

Annual Fee
$150
APR
N/A
Pros:
  • Unlimited 5% cash back on hotels and rental cars booked through Capital One Travel
  • Potential to earn up to $14,400 cash back annually when you spend $60,000 monthly
  • Annual fee of $150 is refunded every year you spend at least $150,000
  • No foreign transaction fee
Cons:
  • As a charge card, the balance must be paid in full each month which may not be ideal for businesses that need to carry a balance
  • The 2.99% late fee on the outstanding statement balance can add up quickly if payments are not made on time
  • Lack of introductory 0% APR offer on purchases

The Capital One Spark 2% Cash Plus is a business charge card that provides unlimited 2% cash back on every purchase, with no preset spending limit. Additionally, cardholders can earn 5% cash back on hotels and rental cars when booked through Capital One Travel. The annual fee for this card is $150, but it is waived if you spend $150,000 or more per year.

As a charge card, the full balance must be paid off every month, and a 2.99% late fee applies to any outstanding balance not paid on time.

Here's a summary of top charge cards for businesses.

Card comparison

Ramp Corporate Card
The fastest, easiest way to manage expenses.
  • Corporate card with customizable spending controls
  • Cashback rewards on purchases
  • Unlimited free physical and virtual employee cards
  • Must have $50,000 in a business bank account to qualify
  • Balance must be paid in full each month

Annual Fee

$0

APR

N/A

Capital One Spark Cash Plus Business Card
  • Charge card with customizable spending controls
  • 2% cashback rewards on purchases
  • Unlimited free physical and virtual employee cards
  • Balance is due each month with a minimum payment requirement
  • Requires a good to excellent credit score to qualify

Annual Fee

$150

APR

N/A

American Express Business Gold Card
  • Business credit card with the option to pay in full or carry a balance, with different APR rates for each option
  • Points-based membership rewards
  • Employee cards available for $50 each
  • Requires a good to excellent credit score to qualify

Annual Fee

$375

APR

19.49%–27.49%

At Ramp, transparency and integrity are core values guiding our content. We believe in the exceptional value of our products, which may shape our perspective. Our methodical approach involves competitor analysis, comparison of credit cards, and frequent reviews to maintain reliability. Review our full methodology for choosing the best business credit cards.

If a business credit card is better suited for your needs…

The best business credit cards include:

  • Ink Business Cash Credit Card. Ideal for small businesses looking for high cashback on office supply purchases and communication expenses. No annual fee and a generous welcome bonus.
  • Marriott Bonvoy Business American Express Card. A great option for business travelers, offering points for hotel stays and additional perks like free annual award nights.
  • Capital One Venture X Business. A premium travel card that offers flexible travel rewards, no foreign transaction fees, and a $300 annual travel credit.

Do charge cards help your business build credit?

Yes, charge cards can help build credit, just like credit cards. When you use a charge card responsibly—making purchases and paying off the full balance on time each month—this positive payment history is reported to the credit bureaus. Consistent on-time payments contribute to a strong credit score, as payment history is a major factor in credit scoring models.

However, since charge cards do not have a preset spending limit, they don't impact the credit utilization ratio, which is the amount of credit used compared to the total available credit. This ratio is an important factor in credit scoring for traditional credit cards. While charge cards won't directly influence this aspect, they still positively impact your overall credit profile through timely payments and responsible account management.

Can you switch from a charge card to a credit card?

It is possible to switch from a charge card to a credit card, but the process depends on the issuer's policies. For example, American Express allows cardholders to request a "product change" to switch from a charge card to one of their credit card options. This process usually doesn’t require a new application, and your account history is typically preserved, which can benefit your credit score.

If a direct switch isn’t available, you may need to apply for a new credit card and then close the charge card if desired. However, closing an older account can impact your credit history and utilization ratio, potentially affecting your credit score. It’s best to check with your issuer for specific details and consider the potential credit impact before making the switch.

What are the disadvantages of a charge card?

Charge cards have several disadvantages that may not make them suitable for everyone:

  1. Mandatory full payment: Charge cards require the entire balance to be paid off each month, which can be challenging if you experience unexpected expenses or cash flow issues. Unlike credit cards, there’s no option to carry a balance, which limits flexibility in managing finances.
  2. High fees and penalties: Charge cards often come with high annual fees, especially for premium cards that offer extensive rewards and benefits. Additionally, if you miss a payment, late fees can be substantial, and continued non-payment may result in account suspension or cancellation.
  3. Limited acceptance: While charge cards are widely accepted, they are not as universally accepted as Visa or Mastercard credit cards. This could be an issue when traveling or in certain locations where acceptance is limited.
  4. No impact on credit utilization: Since charge cards don't have a preset spending limit, they do not affect your credit utilization ratio, an important factor in credit scoring. This could mean fewer opportunities to improve your credit score through low utilization.
faq
What is Pay Over Time with AmEx?

Some charge cards, such as those from American Express, now include a "Pay Over Time" option, which allows select purchases to be carried over with interest—essentially functioning like a hybrid between a credit and charge card.

Ramp’s charge card takes the complexity out of corporate finance

At Ramp, we offer corporate charge cards with no credit check, no personal guarantee, and cashback on purchases. In addition to physical cards, you can also spin up an unlimited number of virtual corporate cards for you and your employees.

Combined with our powerful expense management platform, Ramp cards track and report your business expenses while identifying savings opportunities. To qualify for Ramp, all you need is:

  • A registered LLC or corporation in the US
  • An Employer Identification Number
  • $25,000 or more in a U.S. business bank account—or, commerce businesses may be eligible for our sales-based underwriting
  • Personal contact details as the business owner
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Fiona LeeFormer Content Lead, Ramp
Fiona writes about B2B growth strategies and digital marketing. Prior to Ramp, she led content teams at Google and Intercom. Fiona graduated from UC Berkeley with a degree in English.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.

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