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Is a credit card or a charge card better for your business?


Business owner looking at laptop while also packing stock to ship out.

Compare the differences in credit limits, repayment requirements and extra features to decide which one is right for your company.

Charge cards and credit cards are both useful credit products that can help grow your business. But with unique features that will impact how much you can spend, the repayments you'll need to make and the features on offer, one might be better for your expenses than the other. Breaking down the differences and similarities, this guide explains how you can compare the two cards to decide which type of plastic is right for your business.


Finder's Smarter Small Business series is presented by American Express. Reward your business spending with 150,000 bonus Membership Rewards points when you apply for the American Express Platinum Business card by 22 April 2020 and spend $5,000 on your new card within 3 months. New Card members only. T&Cs apply.

How are charge cards and credit cards different?

Charge cards

  • No pre-set spending limit
  • Up to 55 cash flow days
  • Usually pay the balance in full

Credit cards

  • Fixed credit limit
  • Usually up to 55 interest-free days
  • Revolving line of credit that charges interest

Spending limits

When you apply for a credit card, you're given a set credit limit. The size of your limit will depend on how much you request when you're applying for the card, your credit score and your business's reported financials. You can request for your credit limit to be increased or reduced, but you can't spend beyond the amount you're approved for without having to immediately repay the over-limit amount (if that is an option on the account).

On the other hand, charge cards have no pre-set spending limit and give customers greater spending power. Instead, your purchases are approved based on your current spending patterns, credit history and past repayments. If you can demonstrate that your finances are in order and you can repay what you spend each month (either through documentation or your repayment habits), a charge card can give you the potential to spend as much as you need.

Repayment flexibility

With a business credit card, you'll need to make at least the minimum repayment each statement period. You can pay more, but the minimum is usually around 3% of the outstanding balance. That leaves the remaining balance to accrue interest as you roll it over to the next month. If you pay off the total balance by the statement due date, you won't pay any interest and can also access any available interest-free days on future purchases. You can usually access up to 55 interest-free days, but how many you can use will depend on when you made the purchase during the statement period.

On the other hand, you usually have to pay off your charge card within 55 days and in full at the end of each statement period. The number of days you have to pay it off will depend on when you make the purchase and when your statement is issued. If you don't pay your account in full, you'll be charged a late payment fee.

American Express Platinum Business cardholders who enrol in the Flexible Payment Option feature can choose to pay off a portion of their balance over time. With this option, you can elect how much of your balance you'd like to pay and then carry over any unpaid amount to your next month's balance. You'll pay 21.99% p.a. purchase rate on the outstanding balance.

If your business needs the flexibility of a revolving line of credit that allows you to carry a balance from month to month, a credit card or a charge card with a flexible payment option may be the right choice. On the other hand, a charge card could work better if you're using the card to manage cash flow and can afford to pay it off in full each month.

Extra features and perks

Both credit cards and charge cards can be used to pay for everyday business expenses including travel, shipping, telecoms, paying suppliers and buying equipment.

Using either type of card could also help simplify managing your expenses. Most business charge and credit cards allow you to download your statements and transaction details to platforms like Microsoft Excel or MYOB. Some charge cards like the American Express Platinum Business card offer a dedicated account manager, who can help with anything from commercial enquiries relating to business expenses to questions around financing.

Many business credit and charge cards can be linked with a frequent flyer or rewards program, allowing you to collect points on eligible transactions. You can then use these points to redeem flights and accommodation for business trips, gift cards for employees or to use for credit to your account. As these cards come with additional cardholders, your employees can pick up points as they spend too.

Fees and issuers

Both business credit cards and charge cards tend to have higher annual fees than other cards. However, you can find some credit cards that charge lower annual fees.

Only a few financial institutions in Australia (including American Express and CommBank) offer business charge cards, whereas many banks issue business credit cards, including issuers offering American Express, Visa and Mastercard. This means that you may have more options to compare if you're considering a credit card.

Which one should my business use?

The right card for your business will depend on your spending behaviour, expenses and repayment ability. If you're looking for a card with no pre-set spending restrictions that will help manage cash flow, a charge card can offer you more spending power as long as you can afford to pay it off every month. If you prefer the flexibility to pay for purchases over time and require a revolving line of credit card for your entire balance, you can start comparing business credit cards instead.

Disclaimer: This advice is general and does not take into account your objectives, financial situation or needs. Before applying for any products mentioned, please read the product terms and conditions and consider whether that product is right for you.


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Picture: Getty Images

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