Difference Between Charge Card and Credit Card

When it comes to managing my finances, understanding the differences between charge cards and credit cards is crucial. With a charge card, I know that I must pay off the entire balance each month, without the option to carry a balance over time. This can be both a blessing and a curse – it ensures I avoid accumulating debt, but it also requires strict budgeting to ensure I can cover my expenses.

A credit card offers more flexibility, allowing me to carry a balance from month to month, albeit with interest charges. This flexibility can be convenient for making larger purchases or managing unexpected expenses, but it also requires discipline to avoid falling into debt traps. Ultimately, choosing between a charge card and a credit card depends on my financial habits, goals, and ability to manage payments responsibly.

Comparison Chart

Parameters of ComparisonCharge CardCredit Card
PaymentsFull balance must be paid by due date each month.Minimum payment required, but you can carry a balance and accrue interest. Ouch!
Spending LimitNo pre-set limit, but issuer approves based on your history (think of it like a flexible budget they trust you with).Pre-set spending limit – you can’t go over that (unless you get an increase, which can be tempting).
Interest & FeesUsually no interest charged (if you pay in full each month, that is). But, late fees can be brutal.Interest rates can be high if you carry a balance. Minimum payment trap can be easy to fall into.
AvailabilityLess common, for people with excellent credit history and high income.Widely available, easier to qualify for.
BenefitsMay offer perks like travel rewards or extended warranties (gotta entice those responsible spenders!).Can offer similar benefits, plus some cards have purchase protection or cash back rewards.
Charge Card vs Credit Card

What is a Charge Card?

Charge cards are a common payment option that is devoid of any interest. It is used by cardholders to pay for their purchases in a cashless way. Charge cards come with no fixed limit and offer a number of promotional rewards to cardholders. If you have a charge card, you do not have to take cash with you. Some of the famous charge cards are the American Express® Gold Card and Capital One Spark Cash Plus.

Charge cards are issued on the condition that the cardholder has to pay the whole amount in the same month for all his purchases. In case he does not pay the monthly amount, he is likely to bear penalties and severe charges. Besides the monthly payment, the cardholder is required to pay a fixed annual fee as well.

How Charge Cards Work

When you use a charge card to make a purchase, the amount is added to your account balance. At the end of the billing cycle, you are required to pay the full balance. If you fail to do so, you may face late fees, penalties, and even the cancellation of your card.

No Preset Spending Limit

One of the unique features of charge cards is that they do not have a preset spending limit. This means that your purchasing power is more flexible and can adapt to your spending needs. However, this does not mean that you have unlimited spending power. The card issuer will still monitor your spending behavior and may decline transactions if they deem them too risky.

Rewards and Benefits

Charge cards come with a variety of rewards and benefits that can be attractive to frequent travelers or big spenders. These may include:

  • Travel perks such as airline lounge access, hotel upgrades, and travel insurance
  • Cashback or points on purchases that can be redeemed for travel, merchandise, or statement credits
  • Concierge services that can help with booking travel, making restaurant reservations, or finding hard-to-get event tickets
  • Purchase protection and extended warranties on eligible items bought with the card

Pros and Cons of Charge Cards

Like any financial product, charge cards have their advantages and disadvantages. Here are some pros and cons to consider:


  • Encourages responsible spending and paying off balances in full each month
  • No preset spending limit offers flexibility for large purchases
  • Generous rewards and benefits for frequent travelers or big spenders
  • Can help build credit history if used responsibly


  • No option to carry a balance or pay over time, which may be necessary for some large purchases
  • High annual fees compared to many credit cards
  • Late payments can result in steep penalties and card cancellation
  • Fewer protections compared to credit cards, such as the ability to dispute charges or liability for unauthorized transactions

Examples of Charge Cards

  1. American Express Green Card – This is like the OG of charge cards, been around forever.
  2. American Express Gold Card – A step up from the Green, with some extra perks.
  3. American Express Platinum Card – The cream of the crop for AmEx charge cards, lots of travel benefits.
  4. Diners Club International Card – Not as common these days, but still a classic charge card.
  5. Carte Blanche – Another old-school charge card, dating back to the 1950s

What is a Credit Card?

Credit cards are the globally accepted and widely used payment to pay for things without cash in hand. These are electronic cards with specialized chips to be scanned in machines at the counter of every selling outlet. Credit cards allow users to shop feasibly without having to worry about having handy cash.

Credit cards are issued by banks and fintech companies to users who agree to the condition that they will repay the borrowed money (taken while using the card) within a fixed period of time. At the end of the period, cardholders are notified to pay their borrowed amount plus interest and taxes. Interest rate is a key characteristic of all credit cards.

What is Credit Card

How Credit Cards Work

When you use a credit card to make a purchase, you’re borrowing money from the card issuer. You’ll need to pay back the borrowed amount, with interest, unless you pay your balance in full each month. Credit card issuers set a credit limit, which is the maximum amount you can borrow at any given time.

Interest Rates and Fees

Credit cards come with high interest rates, which can make borrowing expensive if you carry a balance from month to month. Interest rates can vary depending on the card issuer, your creditworthiness, and the type of card you have. Some cards also charge annual fees, balance transfer fees, cash advance fees, and late payment fees.

Types of Credit Cards

There are several types of credit cards available, each with its own features and benefits.

Rewards Credit Cards

These cards offer points, miles, or cash back on purchases. You can redeem these rewards for travel, merchandise, gift cards, or statement credits. Some popular rewards cards include:

  1. Cash Back Cards: These cards offer a percentage of your purchases back as cash, which you can redeem as a statement credit or direct deposit.
  2. Travel Rewards Cards: These cards offer points or miles that you can redeem for flights, hotel stays, and other travel-related expenses.

Secured Credit Cards

These cards require a cash deposit that serves as collateral and determines your credit limit. They’re used by people who are new to credit or have bad credit and want to build or rebuild their credit scores.

Balance Transfer Cards

These cards allow you to transfer high-interest credit card balances to a new card with a lower or 0% introductory APR for a set period. This can help you save on interest and pay down your debt faster.

Benefits of Using Credit Cards

When used responsibly, credit cards can offer several benefits:

  1. Building Credit: Using a credit card and paying your bills on time can help you establish and improve your credit score.
  2. Convenience: Credit cards are widely accepted and eliminate the need to carry cash.
  3. Rewards: Many credit cards offer rewards programs that can save you money or provide valuable perks.
  4. Fraud Protection: Credit cards come with zero liability policies that protect you from fraudulent charges.

Drawbacks of Using Credit Cards

Despite their benefits, credit cards also have some potential drawbacks:

  1. Overspending: The ease of using credit cards can lead to overspending and accumulating debt.
  2. High Interest Rates: If you carry a balance, high interest rates can make your debt grow quickly.
  3. Fees: Many credit cards charge annual fees, balance transfer fees, cash advance fees, and late payment fees.
  4. Potential Impact on Credit Score: Late payments, high balances, and applying for too many cards at once can negatively impact your credit score.

Examples of Credit Cards

  1. Visa – I mean, it’s everywhere you want to be, right? Tons of banks offer Visa cards.
  2. Mastercard – The other big player in the credit card game, accepted all over the place.
  3. Discover – They’ve got those fun commercials and the cash back rewards.
  4. Chase Sapphire Reserve – A favorite among travel hackers and points enthusiasts.
  5. Capital One Venture – Another solid travel rewards card, with a lower annual fee than the Sapphire Reserve.

Differences Between Charge Card and Credit Card

Payment obligations:

  1. Charge cards: You’re required to pay the full balance by the due date each month. There’s no option to carry a balance from month to month.
  2. Credit cards: You have the flexibility to pay the full balance, minimum payment, or any amount in between. carrying a balance is allowed, but you’ll be charged interest on the unpaid portion.

Interest charges:

  1. Charge cards: Since you’re paying the full balance each month, there are no interest charges involved.
  2. Credit cards: If you carry a balance, you’ll be charged interest based on your card’s Annual Percentage Rate (APR). The interest can add up quickly if you’re not careful.

Credit limits:

  1. Charge cards: Often have no pre-set spending limit, giving you more purchasing power. However, this doesn’t mean unlimited spending, as the card issuer may still impose certain restrictions.
  2. Credit cards: Come with a predetermined credit limit based on your creditworthiness. Once you reach the limit, you can’t make additional purchases until you pay down the balance.

Impact on credit score:

  1. Charge cards: Typically don’t have a significant impact on your credit utilization ratio, as there’s no revolving balance. However, late payments can still hurt your credit score.
  2. Credit cards: Your credit utilization ratio (the amount you owe compared to your credit limit) is a key factor in your credit score. High balances relative to your limit can lower your score.

Rewards and perks:

  1. Charge cards: Often come with premium rewards programs, offering points, miles, or cashback on purchases. They may also provide exclusive perks like travel benefits and concierge services.
  2. Credit cards: Also offer rewards programs, but they may not be as generous as those of charge cards. Perks and benefits vary depending on the card tier (e.g., standard, gold, platinum).


  1. Charge cards: Less widely accepted compared to credit cards, particularly among smaller merchants or internationally.
  2. Credit cards: Widely accepted by most merchants worldwide, making them more convenient for everyday use.

Annual fees:

  1. Charge cards: Tend to have higher annual fees due to their premium rewards and perks.
  2. Credit cards: Annual fees vary, with some cards having no annual fee at all. Higher-tier cards with more benefits come with higher fees.

Approval requirements:

  1. Charge cards: Often require a higher income and a strong credit history for approval.
  2. Credit cards: Have varying approval requirements depending on the card tier. Some cards are designed for those with limited or fair credit, while others cater to those with excellent credit.


  1. https://core.ac.uk/download/pdf/6665218.pdf
  2. https://www.sciencedirect.com/science/article/pii/S0167718706000890