What does no preset spending limit mean?
Cards with no preset spending limit (NPSL), often referred to as charge cards, don’t have a traditional fixed credit line. Instead, the total amount you can spend on the card at one time dynamically adjusts to your spending behavior, payment history, credit profile and other factors. Cards with no preset spending limit offer business owners and entrepreneurs flexibility, alleviating the need to request credit line increases. They offer purchasing power that adapts so you can potentially spend more and earn more rewards. However, cards with no preset spending limit might not be the right fit for all business owners due to the lack of a clearly stated credit limit. Keep reading to learn more.
What you’ll learn:
- A card with no preset spending limit doesn’t mean unlimited spending.
- The amount you can spend at one time on a card with no preset spending limit fluctuates based on a number of factors, including spending behavior, payment history and credit profile.
- Some of the benefits of a card with no preset spending limit are flexibility and the potential to dynamically grow your purchasing power over time without the need to submit credit line increase requests. However, some small-business owners dislike the lack of transparency that comes with no preset spending limit.
- Cards with no preset spending limit can be a good fit for small businesses because they can help establish a business’s credit history and often offer the opportunity to earn rewards like travel miles or cash back.
How do no preset spending limit (NPSL) cards work?
NPSL charge cards allow cardholders to make purchases without a fixed credit limit. However, spending is still controlled based on a number of factors, including spending habits, payment history and credit profile—making the limit flexible as opposed to unlimited.
Most charge cards with no preset spending limit are designed for the balance to be paid in full at the end of each payment cycle. Your payment history is one factor that determines how much you’re able to spend on the card at a time.
What are the benefits of charge cards with no preset spending limit?
Cards with NPSL offer many benefits, including:
- Flexible spending: Even though cards with no preset spending limit typically require the balance to be paid in full each cycle, they can provide additional financial flexibility for many business owners, as the amount they can spend at one time dynamically adjusts over time. This means that some business owners may be able to make larger purchases when needed without facing a strict preset limit.
- Improved financial management: Without a preset limit, your purchasing power can adjust dynamically based on your spending behavior, payment history, credit profile and other factors. This can help encourage responsible financial habits by guiding how much you can spend at one time.
- Rewards: Many cards with no preset spending limit offer travel and other benefits that can add significant value for frequent users. For example, Capital One’s Venture X Business card is an NPSL card that adapts to your business needs, offering enhanced travel benefits with no restrictions, exclusions or blackout dates when redeeming your reward benefits.
- Pays for itself: With some charge cards with no preset spending limit, your spending habits can make the annual fee worth it. For example, with the Capital One Spark 2% Cash Plus card, the $150 annual fee is refunded on your account’s anniversary date if you spend above a certain threshold. This allows you to enjoy the cash back benefits without the ongoing cost of an annual fee.
What are the drawbacks of charge cards with no preset spending limit?
For many, a card with no preset spending limit is a good choice for their business. However, there are potential drawbacks to consider. For instance, for small-business owners, the lack of a predetermined credit limit can lead to uncertainty about how much they can spend or what they might owe at the end of each billing cycle. This can make managing cash flow challenging for newer or small businesses.
How to manage your credit with a card with no preset spending limit
Charge cards with no preset spending limit are good for small businesses because they offer flexibility in spending as business needs change. However, managing your spending carefully is important to avoid overspending or ending up with a balance you’ll struggle to pay in full.
How to qualify for a card with no preset spending limit
You typically need excellent credit to qualify for cards with no preset spending limit. Similar to traditional credit cards, some of the factors issuers consider are:
- Credit history: Because cards with no preset spending limit offer more flexibility, issuers examine your credit history to determine whether you manage credit responsibly.
- Predictable cash flow: Predictable cash flow is essential because issuers need to be confident that you can pay off the balance in full each month.
- Payment history: Demonstrating a history of on-time payments with other credit accounts may increase your chances of approval for a card with no preset spending limit.
- Low debt-to-income (DTI) ratio: A lower DTI ratio suggests sufficient income to manage additional credit. Experts recommend keeping your DTI ratio between 28% and 35%, meaning no more than 35% of your income should cover debts.
No preset spending limit FAQ
Learn more about cards with no preset spending limit with answers to these frequently asked questions:
How does no preset spending limit show up on a credit report?
Cards with no preset spending limit may show up on your credit report as “flexible spending” cards. But it depends on the credit-scoring agency and your credit report.
How does a no preset spending limit card affect credit utilization?
Since cards with no preset spending limit don’t have an established limit, credit-scoring companies can’t use them to calculate credit utilization as they would with a traditional credit card. Therefore, no preset spending limit cards are often excluded from credit utilization calculations.
How does a card with no spending limit affect credit scores?
Cards with no preset spending can positively or negatively impact credit scores; it depends on how they are used. Maintaining on-time payments and responsible use can help avoid decreases in your personal credit score.
Which Capital One cards have no preset spending limit?
Capital One’s Spark Cash Plus business card has no preset spending limit, to allow for adaptable spending on business-related expenses. You also have the chance to get your annual fee refunded once you hit a certain spending amount.
Capital One’s Venture X Business card also has no preset spending limit. It offers rewards and elevated travel benefits with business-grade capabilities.
Key takeaways: Cards with no preset spending limit
A card with no preset spending limit has purchasing power that will fluctuate depending on your spending behavior, payment history, credit profile and other factors.
For those who qualify, cards with no preset spending limit offer benefits like financial flexibility, enhanced financial management and membership rewards. However, these cards also might make it challenging for business owners to stay on top of what they can spend and what they owe at any moment.
Cards with no preset spending limit can be especially beneficial for small businesses as they offer the financial flexibility needed to scale and can help build or establish a business’s credit profile. If you’re ready to take your business to the next level, compare business credit cards from Capital One for the features and benefits that best meet your business needs.
