Charge Card vs Credit Card – Difference and Comparison

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.

Charge cards are not widely used because most customers do not consider them budget-friendly. Since a charge card has no spending limit, it temporarily increases your purchasing power, thereby burdening you with a lot of amounts to be paid back. A credit score is assigned to every cardholder that is impacted by your repayments of the money used by you.

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.

The most common types of credit cards are Visa, Mastercard, Discover, and American Express. They can be used at hotels, airports, stores, eCommerce platforms, et cetera. There is a specific spending limit for each card, and it has a fixed annual fee. A typical credit card has information like name, date of issuance, date of expiry, card number, CVC, et cetera on it.

Difference Between Charge Card and Credit Card

  1. Charge card does not have a spending limit, whereas credit cards follow a spending limit.
  2. Charge card has higher annual fees, whereas credit charges charge lower annual fees.
  3. Charge card has a fixed repayment deadline, whereas credit charges are lenient in them.
  4. Charge cards are not widely used, whereas credit cards are popular.
  5. Charge cards increase purchasing power, whereas credit cards are budget-friendly.

Comparison Table Between Charge Card and Credit Card

Parameters of ComparisonCharge CardCredit Card
UsageCharge cards are not popular among peopleCredit cards are more commonly used
Interest RateCharge cards are interest-free in their working mechanismCredit cards are imposed with  a high or moderate interest rate
Annual ChargesCharge cards entail higher annual feesCredit cards have lesser annual charges
Spending LimitThere is no spending limit on a charge card Credit cards are used for payments within a limit
Penalties and FineHeavy penalties are imposed on failure to repayPenalties are less severe and compensated