No preset spending limit doesn’t mean unlimited spending capability. While these cards offer benefits when it comes to buying power, it’s best to weigh the pros and cons for your business.
The majority of credit and charge cards impose a set limit on what you can spend but a select few take a different approach.”
If you’re interested in putting one of these cards to work for your business, these tips can help.
See related: How a business credit card helped this business bloom
There is still a cap on what you can spend
No preset spending limit isn’t the same thing as no limit or no boundaries at all on what you can spend.
“It means that you’ll have a spending limit, but you won’t really know about it until you hit it,” says Miguel A. Suro, founder of The Rich Miser. “It does not mean unlimited spending.”
That goes even for ultra-elite, no preset spending limit cards – such as the American Express Centurion Card. Suro says cards that are touted as being no limit are often used as a marketing tool by credit card companies.
“By saying your card has no limit, issuers may try to make you feel rich and unbound,” he says. “The fact is that the more you spend, the more they benefit, in terms of transaction fees that they charge merchants and interest you may have to pay on credit card debt.”
The amount you can charge can change from one month to the next, based on your spending patterns, credit and payment history.
American Express, the chief issuer of no preset spending limit cards, says that it evaluates individual cardmember limits on a case-by-case basis. Other than that, it’s difficult to pinpoint specific guidelines for what could raise or lower your limit month to month.
Business charge card vs. credit cards with no preset limit
Here’s a quick look at no preset spending limit options for business:
|Charge card||Rewards rate||Credit card||Rewards rate|
|Business Green Rewards Card from American Express||American Express® Business Gold Card|
|The Business Platinum Card® from American Express|
|The Plum Card® from American Express|
One may be better than the other, based on how you manage your business finances.
“A charge card may be good for people that want to make sure they don’t go into credit card debt,” says Suro. “In other words, you’ll have the bank hold you more accountable than you might hold yourself.”
With either type of card, your spending needs to align with your current and projected cash flow.
“When you run a business and use a card with this method, you need to time large item purchases at a point when your spending capabilities are high,” says Jared Weitz, CEO and co-founder of United Capital Source.
In other words, using a no preset spending limit card may only work in your favor when you have strong business financials to justify larger purchases. You also have to consider your ability to pay them off.
If paying in full consistently isn’t realistic for your business but you’d like to get a no preset spending limit charge card, there is a compromise.
With the Plum Card, you can take up to 60 days to pay with no interest. American Express offers the Pay Over Time feature with its other business charge cards, allowing you to pay selected eligible purchases off over time with interest.
Tailor card choice to spending patterns for earning rewards
With the exception of the Plum Card, all the no preset spending limit options from American Express earn rewards on purchases.
Which one you choose depends on how you spend for your business. If travel is a focal point of your budget, for instance, you may lean toward the Business Green Rewards or Business Platinum Card.
The Business Gold Card, on the other hand, may be better suited to everyday purchases. Bonus rewards categories for that card include:
- Airfare purchased directly from airlines.
- U.S. purchases for advertising in select media.
- U.S. purchases of computer, hardware, software and cloud solutions.
- U.S. gas stations.
- U.S. restaurants.
- U.S. shipping.
Don’t overlook opportunities to increase rewards earnings either.
Amex Offers, for example, allows you to access special offers with an enrolled card to earn additional rewards on business purchases.
Balance the pros and cons of no preset spend limits
The biggest pro to having a no preset spending limit card is that your credit limit will automatically adjust, based on your spending patterns and account history, says Kevin Panitch, founder of Just Start Investing.
“You don’t have to call to get a credit limit increase,” says Panitch, something you’d typically have to do with other credit or charge cards.
That could be helpful for your business if you need to make a bulk inventory purchase or you need to replace a key piece of equipment on the fly. There is a potential drawback, however.
“The biggest con is that you never know what your credit limit actually is,” says Panitch. “And this could negatively impact your credit score.”
Another downside is falling into a pattern of spending that outstrips your business’s ability to pay if you’re using a credit card versus a charge card.
“Don’t let the limitless feeling of this kind of card take you down a path of poor spending patterns,” says Weitz. Diligent attention to purchases is key for using a no preset spending limit card responsibly.
There’s one more thing to watch for, says Suro.
“The big drawback of having no preset spending limit would be having the card issuer cut off your spending when you least expect it,” he says. “Since only the bank knows your true limit, you can have the ugly surprise of being cut off mid-month.”
That could put a serious crimp in your ability to make business purchases and keep cash flow moving smoothly.
If you need some predictability with your credit limit, consider pairing up a no preset spending limit card with a backup option, such as the Ink Business Preferred Credit Card from Chase or the Chase Ink Business Cash Credit Card. The more options you have available, the less likely you are to be caught in a bind if you hit your spending ceiling with a no preset limit card.