Is a Pay-In-Full Charge Card Right for Your Business?

Choosing which business card (or cards) to go with really comes down to two different kinds of cards - a pay-in-full charge card or standard APR credit card. And while determining which card is right for your small business is likely to go beyond interest rates alone, it's important to consider the pros and cons of each category of card when making the choice between pay-in-full or standard credit.

Pay-in-full charge cards are pretty straightforward, and really represent the ideal way to use a credit card. Basically, you charge only what you can pay throughout the month, then pay the entire balance back in full when your bill is due. A lot of these cards advertise themselves as "interest-free", but that's only because you're required to pay that entire balance back each month.

So yes - business charge cards are technically interest-free. They're also known to feature some of the best business rewards of any cards available to business owners. For example, the Business Green Rewards Card from American Express OPEN includes a 5,000 point bonus after your first purchase. Another AmEx charge card - the Business Gold Rewards Card® from American Express OPEN - rewards cardholders with 3x points on airfare purchases directly from airlines. So yes, these cards can be pretty lucrative.

That said, they also have some of the pricier annual fees of any cards on the market today. The aforementioned Gold Rewards Card® waives the annual fee the first year, but thereafter it's $175 just to carry this card. And while you're rewarded with points for the purchases you're making that can be redeemed in all kinds of ways, is it really worthwhile for your business to buy now and pay later when "later" is simply the end of the month? And what if you're a small start-up that's dependent on your credit line who can't afford to pay back all of your business expenses at the end of each month, at least not initially?

Essentially, business charge cards like the ones American Express offers are best for solid, established businesses with lots of cash flow. Business credit cards - the kind that let you carry a balance and pay it off gradually - are best suited for the new(-ish) start-ups out there that need to buy their items up front, then pay later (and in some cases much later).

There's no doubt that thousands of small businesses are dependent on credit cards. Credit cards are easier to obtain than small business loans, they're more sustainable and you get rewards just for making purchases. Interest rates are generally higher, but they're the easiest way for a start-up without a ton of initial cash flow to get the items they need to stay afloat, and they're as lucrative a way to pay as any.

Small businesses that are still new should consider two things when choosing a credit card: 1.) Ongoing interest rates and 2.) Business rewards.

First, credit cards with low interest rates are crucial for a start-up since the lower your rate, the easier it is to pay down your debt. Some business cards are 0 interest credit cards, and apply an interest-free offer to new purchases, balance transfers or both. Others have a low ongoing interest rates that start around 12 percent and up, which is about as good as you're going to get even with an excellent credit score.

Second, it's important to choose a business card that rewards you for the purchases you plan on making anyway. Credit cards that offer bonus cash back at office supply stores, Internet and phone service, or other business-friendly purchases are the most lucrative. The old saying is don't make your budget work for your card - make your card work for your budget. When you're a start-up, any freebies you can accrue are welcome - take advantage of the rewards afforded by your business credit card.

In short, pay-in-full charge cards are suited for established businesses. If that's you, there are some serious rewards points offered by American Express and other major issuers to take advantage of. But if you're a start-up uncomfortable with paying your balance back in full each and every month, you're businesses' best bet is to stick with a business rewards credit card that allows you to pay down your balance gradually each month with a low interest rate.