How business charge cards' flexible payment options help manage cash flow

Here's how American Express charge cards' 'Pay Over Time' and 'Extra Days to Pay' features can help further your business

Rebecca Lake
Personal Finance Writer
Making complex credit topics simple

Flexible payment options with Amex charge cards

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Charge cards can be a helpful tool for managing business cash flow and covering expenses. Some also allow you to earn rewards on purchases, which means money saved for your business.

While they share those features in common with business rewards credit cards, where charge cards differ is in their payment terms.

Traditionally, charge cards require you to pay the balance in full each month. A select few, however, offer flexible payment options.

Here’s everything you need to know about charge cards’ flexible payment options and how you can use them to further your business.

See related: How charge cards are different in credit scoring formula

Flexible payments can smooth cash flow bumps 

Almost every business experiences cash flow hiccups from time to time, making flexible payment options desirable if you’re using charge cards to cover capital needs.

“Payment flexibility is important for small business owners, particularly startups, as cash flow can vary wildly until regular customers get on board,” says Janet Gershen-Siegel, content manager at online business lending marketplace Credit Suite. “And of course, a seasonal business would have this kind of variation even if it isn’t such a new company.”

Slow-paying clients can hinder positive cash flow; being caught off-guard by the unexpected is another potential obstacle.

“Payment flexibility will be important in emergency situations where the predictable flow of cash is disrupted,” says Paul McMeekin, director at online payments platform ACI Worldwide.

A natural disaster or fire, for instance, could require you to temporarily shutter your business. Insurance can take several months to pay out. If a charge card offers flexible payments, you could make any necessary repairs or replace lost inventory to minimize downtime and lost revenue.

“When the insurance payout finally comes, you can pay the full balance,” says McMeekin.

See related: How can I improve cash flow for my business?

"Payment flexibility is important for small-business owners, particularly startups, as cash flow can vary wildly until regular customers get on board."

Charge cards with flexible payment options 

American Express is the sole issuer of charge cards and offers two programs for payment flexibility.

  • "Pay Over Time" allows you to pay off eligible purchases over time, with interest.
  • "Extra Days to Pay" allows you to carry a balance for a set period with no interest.

How American Express’s 'Pay Over Time' works

There are two ways to use Pay Over Time: Pay Over Time Direct and Pay Over Time Select.

  • With Pay Over Time Direct, all eligible charges of $100 or more can be paid over time.
  • Those charges are automatically added to your Pay Over Time balance and you decide whether to just pay the minimum, more than the minimum or your balance in full.
  • Pay Over Time Select allows you to manually choose which eligible charges of $100 or more you’d like to pay over time.
  • With both Direct and Select, you pay interest on your Pay Over Time balance until it’s paid in full.

Interest begins accruing on new purchases on the date they’re added to your Pay Over Time balance. As of October 2018, Pay Over Time Select has an APR range of 20.99 to 24.99 percent. For Pay Over Time Direct, the APR is 20.24 percent. Contact your card’s customer service or look at your guide to benefits to confirm the interest you’ll incur for using either option.

This benefit, however, isn’t automatic. American Express determines who’s eligible for Pay Over Time Select and Direct.

According to an American Express small business representative, eligibility is decided on a case-by-case basis. Your credit history and American Express account history influence eligibility decisions. In the case of Pay Over Time Select, those factors also determine your APR.

How American Express’s 'Extra Days to Pay' works

If you have the Plum Card, payment flexibility is already built in.

You can get a 1.5 percent Early Pay Discount on your balance when you pay within 10 days of your statement closing date. This discount appears as a credit on your next statement.

Extra Days to Pay allows you to make your minimum payment due, which is 10 percent of your balance. You can then take up to 60 days to pay off the rest of the balance without incurring interest.

"For a small business owner with a somewhat steady cash flow, early payment discounts are right up their alley...[and] are also going to have the massive benefit of increasing business credit scores."

Choosing a flexible payment option for your business

Pay Over Time, Early Pay Discounts and Extra Days to Pay have different advantages, says Credit Suite’s Gershen-Siegel. The one that works best for your business depends on your cash flow consistency.

“For a small business owner with a somewhat steady cash flow, early payment discounts are right up their alley,” she says. “Early payments are also going to have the massive benefit of increasing business credit scores, because unlike personal credit, the single most important thing anyone can do to raise their [business] scores is to pay on time or early, and as close to in full as possible.”

The Extra Days to Pay option might be more appropriate when you need a short-term cash flow fix.

Alan LaFrance, SEO strategy manager at lawn care company LawnStarter, has used that option with the Plum Card for placing larger stocking orders.

“The two-month, no interest period lets me order in bulk during vendor discount events, rotate out most of the stock and essentially improve my return on investment for little to no cost,” he says.

LaFrance says having the flexibility to pay over time also works well for larger purchases, such as buying new equipment, “because they’re often the types of purchases that have long returns.”

If returns are bigger than the costs of the payment flexibility – for example, due to interest charges – and it helps your business to scale, consider that a win, says LaFrance.

See related: 5 things you should know about business credit scores

Use flexible payments wisely

LaFrance says one potential trap with charge cards that offer flexible payment options is that you can become overreliant on those features.

“Companies shouldn’t get in a situation where they require the Early Pay Discount or high amounts of differed expenses to maintain profitability,” says LaFrance. “They should maintain a healthy debt-to-income ratio to mitigate risk and grow at a sustainable rate.”

Solving cash flow challenges can help you be more strategic about when it makes sense to take advantage of the Early Pay Discount, Extra Days to Pay or Pay Over Time services. Additionally, it could keep you from incurring too much business debt with your cards.

See related: How to dig out of business card debt

How to manage cash flow efficiently

These tips can help you manage cash flow more efficiently:

  • Revisit payment terms. If slow or late-paying clients are dragging down cash flow, consider updating your terms to shorten the payment window. Implement a late-payment policy that dictates when late fees or interest will begin to accrue on unpaid balances.
  • Expand payment options. Giving customers or clients more payment options, beyond cash or check could encourage them to pay faster. If you don’t accept ACH or mobile payments, for instance, that’s something to reconsider.
  • Streamline costs. What you have going out of your business is just as important as what’s coming in for your cash flow. Review your business budget quarterly to look for expenses you can reduce or trim altogether.
  • Renegotiate payment terms to vendors. Your vendors want to get paid as much as you do, but sometimes due dates don’t always coincide with when cash is flowing into your bank account. Reach out to vendors to see if you can extend payment terms or change due dates so they better align with when your receivables are paid.

All of that can improve your cash flow, but there may still be instances where you need a little more time to pay with your charge card. If you’re using Pay Over Time, Gershen-Siegel cautions to read the fine print carefully, as the higher APR may outweigh the program’s convenience.


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Updated: 12-15-2018