Charge Card vs. Credit Card: What Is the Difference?
6 Min Read | Published: April 16, 2024
This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Charge cards typically require you to pay your balance in full each month, while credit cards allow you to make the minimum payment, or more, at the end of the month.
At-A-Glance
- Unlike a credit card, a charge card requires you to repay your balance in full at the end of every month.
- Credit cards may offer more flexibility than charge cards because they allow you to make the minimum payment, repay your balance in full, or pay any amount in between.
- True charge credits are harder to find today, with credit cards being the more popular option.
Since charge cards and credit cards may look identical, many people use these terms interchangeably. However, there are several noteworthy differences between these two types of cards. In this article, we’ll dive deeper into charge cards vs. credit cards so you can determine the right option for your needs and preferences.
What’s a Charge Card?
Traditional charge cards are credit cards without a preset spending limit. When you make a transaction on a charge card, it may or may not get approved, depending on factors like your payment history and spending patterns. At the end of the month, you’ll be required to repay your charge card balance in full. While most charge cards don’t charge interest rates, they may penalize you with fees if you don’t pay back your balance in full each month.1
What’s a Credit Card?
Credit cards are a revolving credit line, meaning you can continuously borrow funds and repay them, as long as your account is in good standing. If you use a credit card, you’ll typically have a preset spending limit as well, although there are some notable exceptions. Although there is typically a minimum monthly payment, with a credit card you don’t have to pay back your balance in full each month. If you don’t, however, you may need to pay interest charges in addition to your balance, unless you have a card with a 0% introductory annual percentage rate (APR).2
Differences Between Charge Cards and Credit Cards
The chart below outlines the key differences between charge cards and credit cards.3
| Charge Cards | Credit Cards | |
|---|---|---|
| Availability | Less common | Readily available |
| Preset Spending Limits | No (Typically) | Yes (Typically) |
| Payment Requirements | Typically the balance must be repaid in full every month | Typically you can make at least the minimum monthly payment to remain in good standing |
| Interest | Typically no, but you can incur fees or additional penalties if you don’t pay back your balance in full at the end of every month | Yes, interest may be charged if you don’t repay your balance in full at the end of every month. Interest may also apply for other transactions such as cash advances and balance transfers. |
| Annual Fees | Very common | It depends on the credit card; credit cards with no annual fees are available |
Does American Express Offer Charge Cards?
Yes, and no. Some American Express Cards, namely the American Express® Green Card, American Express® Gold Card, and the American Express® Platinum Card, can function as traditional charge cards or as credit cards, depending on what works best for your financial situation.
These Cards include:
- No Preset Spending Limit
The Amex Green, Gold, and Platinum Cards have No Preset Spending Limit, just like most charge cards do. No preset spending limit means the spending limit is flexible. Unlike a traditional credit card with a set limit, the amount you can spend adapts based on factors such as your purchase, payment, or credit history – giving you the flexibility to unlock more purchase power as you use your Card.
- Potential to Avoid Certain Types of Interest
Paying off your balance by the due date each month allows you to avoid interest on most purchases, just like you would with a charge card. However, keep in mind that interest will still apply for certain transactions including cash advances and balance transfers.
- Payment Flexibility
In addition, the Amex Green, Gold, and Platinum Cards offer a payment flexibility feature called Pay Over Time. With Pay Over Time, Card Members can decide if and when to carry a balance with interest, up to their Pay Over Time Limit, rather than paying in full each month. It’s up to you to choose what works best for your unique budget and financial situation.
Did you know?
Credit cards may be available to borrowers with fair or even poor credit whereas charge cards may require good, or even excellent credit. Note that this will vary, depending on the card issuer and the card in question.
Frequently Asked Questions
Whether a charge card is better than a credit card depends on your individual needs and preferences. If you can repay your balance in full every month and want to avoid having a preset spending limit, it may be worthwhile. A credit card, however, may make more sense if you’d like some flexibility when it comes to repayment.
Some charge cards may offer rewards. These may include cash back in the form of a statement credit or rewards points. However, this will vary depending on the charge card issuer and the card in question.
Charge cards and credit cards can both impact your credit. However, with charge cards, there is no preset spending limit, so credit bureaus don’t consider credit utilization rates in their scoring models. Both charge cards and credit cards can impact your payment history, however, which is an important part of your credit score. If you make your monthly payments on time and use the card responsibly, a charge card could positively impact your credit score over time.
The Takeaway
Both charge cards and credit cards can be used for everyday spending. While charge cards typically don’t have preset spending limits or interest charges, they do require you to pay your balance in full every month. Credit cards, on the other hand, do impose preset spending limits but are more flexible in that they allow you to make the minimum payment or more at the end of every month.
1 “Comparing credit, charge, secured credit, debit, or prepaid cards,” Federal Trade Commission
2 “Credit cards,” Consumer Protection Financial Bureau
3 “What is the difference between charge cards and credit cards,” Experian
Anna Baluch is a personal finance writer from Cleveland, OH. She enjoys helping people from all walks of life make smart financial decisions. Her work can be seen on Credit Karma, Forbes, LendingTree, Insurify, and many other publications. Connect with Anna on LinkedIn.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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The material made available for you on this website, Credit Intel, is for informational purposes only and intended for U.S. residents and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.
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