Charge card vs. credit card: Key differences

A credit card lets you carry a balance with interest. A charge card requires you to pay the full monthly amount with no borrowing buffer. If you want predictable spending limits, a charge card forces discipline. If flexibility matters more, a credit card gives you room to pace your payments, but at a cost.

What is a charge card?

A charge card is a type of payment card that allows cardholders to make purchases, but they must pay off the balance in full at the end of each billing cycle. It 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.

Some charge cards come with high annual fees in exchange for premium rewards like cashback, travel perks, or points. On the other hand, Ramp offers a charge card with no annual fee, giving you the benefits of a charge card plus expense controls and real-time tracking without the typical cost. It’s a smart choice if you want flexibility, spending discipline, and no interest charges.

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% annual percentage rate periods on purchases or balance transfers, making them useful for financing larger purchases or consolidating debt. 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?

A credit card lets you borrow funds to make purchases and then pay them off over time. You get a set credit limit, and anything you spend will count against that limit. Interest kicks in if you do not pay the full balance by the due date.

You receive a statement each month showing your total charges, minimum payment, and due date. You can pay the full balance to avoid interest or make a partial payment and carry the rest forward. The unpaid portion starts accruing interest immediately after the grace period.

Credit cards also impact your credit score. Payment history makes up 35% of your score, so missing even one payment can hurt your profile. On the flip side, responsible use builds credit, which helps you qualify for better rates and higher limits over time.

Key differences between charge cards and credit cards

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

Companies often choose charge cards to avoid interest, control spending patterns, and streamline expense management. On the other hand, credit cards offer flexibility to carry a balance, which can help with short-term cash flow but adds borrowing risk. That difference affects managing working capital, monitoring employee spending, and closing your books.

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, the issuer carries over any unpaid balance to the next month.

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 effectively manage expenses and avoid debt.

Spending limits

Credit cards cap the amount of credit available to cardholders each month. When you reach your credit limit, the issuer blocks new purchases on the account. Your available credit increases again after you pay down some of the balance.

When you are 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, do not have preset card limits. Their spending limit fluctuates (sometimes even monthly) based on factors like monthly spending, liquid assets, historical sales, or repayment and spending 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.

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. Ramp takes a modern approach to eligibility. To qualify, your business must be registered in the U.S. as an LLC, corporation, or limited partnership, with at least $25,000 in a U.S. business bank account.

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.

Impact on credit score

Credit utilization refers to how much of your available credit you are 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.

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 do not 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.

Best charge cards for businesses

Some companies need tighter controls over employee expenses, while others want to maximize rewards from high monthly spending. The best charge card depends on how your business operates, where you spend, and what tools you need to manage cash flow.

Ramp Corporate Card

The Ramp Corporate Card offers flexibility, control, and speed. There’s no annual fee, no interest, and no personal credit check or guarantee. You qualify based on business revenue, not your credit score, and can get approved with at least $25,000 in a business bank account.

Ramp offers consistent cashback, customizable spending limits, and smart controls by user, vendor, or category. It also bundles expense management, bill pay, and travel booking on one platform. You get over $350K in partner rewards and full accounting integrations. Ramp delivers a high-limit, zero-fee card built for fast-moving businesses that value efficiency.

American Express Business Gold Card

The AmEx Business Gold Card is a strong option for businesses with high monthly spending in select categories. You earn 4X Membership Rewards® points on the top two eligible categories each billing cycle, including U.S. advertising, restaurants, or gas stations, to up to $150,000 per year.

The welcome offer is generous, too, with 100,000 points after $15,000 in purchases within three months. The $375 annual fee is steep, but the value can outweigh the cost if your spending aligns with the bonus categories. There’s no preset spending limit, offering flexibility as your business grows. However, if your expenses fall outside the reward categories, the return on spending drops.

Capital One Spark Cash Plus Business Card

The Capital One Spark Cash Plus is a charge card designed for businesses with significant monthly expenses and the ability to pay balances in full each month. It offers unlimited 2% cash back on all purchases, with no category restrictions, and 5% cash back on hotels and rental cars booked through Capital One Travel.

While it carries a $150 annual fee, this fee is refunded each calendar year you spend $150,000 or more. Additionally, new cardholders can earn a $2,000 cash bonus after spending $30,000 in the first 3 months, with an additional $2,000 bonus for every $500,000 spent in the first year. The card also offers free employee cards with customizable spending limits, purchase protection, extended warranty, and travel assistance services.

Best credit cards for businesses

Not all business credit cards offer the same value, and choosing the right one depends on how you spend, travel, and manage rewards. Some cards give you cashback on everyday purchases. Others are built for travel perks or partner-specific benefits.

Business credit card usage is growing, with over 79% of small businesses using them to cover operating expenses. However, rates, rewards, and features vary widely.

Ink Business Cash® Credit Card

This card is a strong fit for businesses that consistently spend on office supplies, internet, phone services, gas, and dining. You earn high cashback rates on the first $25,000 spent annually in these categories and 1% back on everything else.

There’s no annual fee, which keeps overhead low, and the card includes a 12-month 0% intro APR on purchases. This is useful if you need to make upfront investments. You will also get a welcome offer of up to $750 cash back after meeting spending thresholds in the first six months.

Marriott Bonvoy Business® American Express® Card

This card delivers solid value if your team travels frequently and books Marriott hotels. You earn 6X points at participating Marriott properties and 4X on common business expenses like gas, restaurants, shipping, and wireless services.

The $125 annual fee is offset by ongoing benefits, including automatic Gold Elite status, 15 Elite Night Credits per year, and an annual 7% discount on standard Marriott rates. The current welcome offer includes three Free Night Awards after you spend $6,000 in the first six months, each valued at up to 50,000 points.

Capital One Venture X Business

Designed for businesses with high travel volume, this card offers premium rewards and travel perks. You earn 2X miles on all purchases and up to 10X miles on travel booked through Capital One. The card comes with a $395 annual fee, but that’s offset by a $300 annual travel credit and 10,000 anniversary miles each year.

If you spend heavily, the welcome offer can be valuable. You can earn up to 350,000 miles by meeting two separate spending milestones. Added perks include unlimited lounge access and strong travel insurance coverage, making it a good fit for frequent flyers.

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

You can switch from a charge card to a credit card. However, you will need to apply for a new credit card rather than convert your existing charge card. Most issuers do not allow direct transfers between the two, since charge cards and credit cards are structured differently. That means you will need to choose a new credit product that fits how your business manages payments.

If you need the flexibility to carry a balance, applying for a credit card could make sense. But charge cards come with their own advantages, like encouraging clean month-end books, helping you avoid interest, and providing dynamic spending power that grows with your business.

Most issuers don’t allow a direct switch between the two, so you’ll need to apply separately for a credit card. Still, that doesn’t make your charge card any less useful. In fact, keeping it open can support your business credit profile over time. Length of credit history makes up about 15% of your score. Using a charge card consistently and responsibly can reinforce strong financial habits and lender confidence.

Choosing the right card starts with understanding how you manage spend

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. This provides some financial flexibility during tighter times.

If a charge card fits your financial model, Ramp offers a corporate charge card built for modern businesses. There’s no annual fee, no interest, and no personal credit check. Instead, Ramp evaluates your company’s cash position and financial activity. You get dynamic spending limits, real-time visibility into expenses, and automation tools that reduce time spent on reconciliation and approvals.