- Entrepreneurs, startups, and small business owners use business cards for short-term funding.
- Business charge cards don’t have pre-set credit limits, so they can allow businesses to make large business purchases.
- This article covers what business charge cards are, how they’re different from business credit cards, and how to use them to leverage business credit for growth.
How Business Charge Cards Are Different From Credit Cards
Businesses leverage credit cards and business charge cards to access short-term funding, but there are several key differences in terms of how they work and their features.
Here are the main differences:
Business credit cards offer a revolving credit line, much like personal credit cards. This means you have a preset credit limit, and you can carry a balance from month to month (as long as you make at least the minimum payment).
On the other hand, business charge cards typically don’t have a preset spending limit. Instead, your spending limit is dynamic and based on factors like your credit history, payment history, and business spending patterns (your personal credit and personal finances may matter even though it’s a business account). This means you can potentially make larger purchases than your credit limit on a credit card, but you’re also expected to pay the full balance each month.
If you carry a balance on your business credit card, you’ll be charged interest on the outstanding amount. The interest rate varies depending on the card issuer and your creditworthiness. With business charge cards, you are required to pay the full statement balance by the due date. There are no interest charges because you’re not allowed to carry a balance from month to month.
Business credit cards require you to make minimum monthly payments, which are typically a small percentage of your outstanding balance, along with interest charges. Since you can’t carry a balance on a business charge card, there are no minimum monthly payments.
Business credit cards may come with an annual fee, although some may waive the fee for the first year or offer fee-free options with fewer rewards or perks. Business charge cards may come with higher annual fees compared to credit cards. These fees are for the privilege of not having a preset spending limit and the convenience of paying the full balance each month.
4 Ways to Use Business Charge Cards for Growth
There are many ways that business charge cards can help you boost your business. Here are the four most common ways small business owners are utilizing charge cards today.
1. Build business credit
Using a business charge card can help build your business credit profile since some charge cards — like the Nav Prime Card that’s available exclusively to Nav Prime members — report your positive payments to the business credit bureaus. (Plus, there’s no hard credit check when you apply).
Boosting your personal creditworthiness and getting higher business credit scores help you become eligible for more business credit cards and small business loans with better terms.
2. Easier financial management
Linking a charge card to your main business bank account can help you manage your business’s finances. Avoid fees on late payments by connecting your charge card to the checking account you’re paying from and set up automatic payments.
You can also import expenses into your accounting systems to get a unified view of your business’s cash flow.
3. Control spending
With many business charge cards, you can set spending limits and track spending over your entire business. This control helps you build financial discipline among your entire team to only spend on what you need.
Additionally, you may be able to access rewards programs to get cash back or points for what you’re already spending.
4. Access growth funding
Building good credit can open up funding options, and Nav Prime doubles your tradelines to help you build credit. Get one tradeline by using the Nav Prime Card and a second tradeline with your monthly Nav Prime payment.
Also, you can see data insights that help forecast cash flow needs and access opportunities to help you demonstrate financial management skills to lenders.
The Bottom Line
It can be a challenge to find the right business charge card — there aren’t many out there — but using one can be invaluable for business growth. This is especially true if you have the right one that offers tradeline reporting, spending controls, and no hard credit check when you apply. We know how important these features are for your future, which is exactly why Nav is offering them to our Nav Prime users.
This article was originally written on November 7, 2023.