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Charge cards and credit cards are commonly mistaken for the same type of product. Both have similar application processes, and you usually have hard pulls on your credit report when you apply. Additionally, charge cards and cards have similar physical card designs.
The primary difference between the two types of cards is the ability to carry a balance from month to month. A credit card allows debt to be paid over time with interest. But a charge card must be paid in full every month. If the balance on a charge card is not paid off, the account holder may quickly find that their card no longer works.
However, charge cards and credit cards also have important other differences. Let's take a look at what you need to know about the differences between a charge card and a credit card.
Page Contents
Charge Card vs. Credit Card: Key Differences
Credit limits
While credit cards have a set credit limit for how much you can spend on the card at one time, an advantage of charge cards is they usually do not have preset spending limits. No Preset Spending Limit means the amount you can spend adapts based on factors such as your purchase, payment, and credit history.
Charge cards are a great tool should the need to make a large purchase arise. They provide greater flexibility than a credit card with a designated credit limit. Charge cards also help you avoid reaching a credit card’s limit. With a traditional credit ard, approaching a credit card's limit will increase your “credit utilization” and negatively impact your overall credit score.
However, a lack of preset spending limits on charge cards does not equate to unlimited spending ability. The card issuer still sets limitations on your account based on variables like payment history, financial resources, and credit score.
Before attempting a large purchase, check online or call your charge card provider to confirm your current purchasing power. Additionally, remember that you must still pay the full balance according to the due dates set by the card issuer.
We always recommend paying balances in full each month, no matter which type of card you use. If you follow that guidance, there is not much difference in how you use a charge card versus a credit card.
Related: A Beginner's Guide to Building Healthy Credit
Interest rates
You can carry a balance on a credit card. However, you'll pay interest if you make only the minimum payment or pay less than the full balance that month. Even worse, credit card holders are charged both interest and late fees if the minimum payment is not met.
Interest rates are not an option on most charge cards, as you typically need to pay off the full balance each month. However, American Express offers the ability to “Pay Over Time” on cards like The Platinum Card® from American Express and American Express® Gold Card. This enables cardmembers to pay for charges on these cards with interest over time or choose to pay their monthly balance in full.
- Earn 80,000 Membership Rewards® Points after you spend $8,000 on eligible purchases on your new Card in your first 6 months of Card Membership.
- Earn 5X Membership Rewards® Points for flights booked directly with airlines or with American Express Travel® up to $500,000 on these purchases per calendar year and earn 5X Membership Rewards® Points on prepaid hotels booked with American Express Travel®.
- $200 Hotel Credit: Get up to $200 back in statement credits each year on prepaid Fine Hotels + Resorts® or The Hotel Collection bookings through American Express Travel using your Platinum Card®. The Hotel Collection requires a minimum two-night stay.
- $240 Digital Entertainment Credit: Get up to $20 back in statement credits each month on eligible purchases made with your Platinum Card® on one or more of the following: Disney+, a Disney+ bundle, ESPN+, Hulu, The New York Times, Peacock, and The Wall Street Journal. Enrollment required.
- With American Express Global Lounge Collection® eligible Card Members can enjoy access to over 1,400 airport lounges globally, including The Centurion® Lounge, Unlimited Delta Sky Club® Access when flying an eligible Delta flight, Escape Lounges, Lufthansa Lounges when flying Lufthansa Group, Plaza Premium, Priority Pass™ Select Lounges, & Additional Global Lounge Collection Partner Lounges subject to visit limitations. Lounges may have their own rules, like additional access rules and guest fees, and for Priority Pass Select, you need to enroll and there are unlimited airport lounge visits for Card Members. With Delta Sky Club Access, Card Members will receive 10 Visits to the Delta Sky Club to be used from February 1 until January 31 of the next calendar year and can unlock Unlimited Delta Sky Club Access by spending $75,000 in eligible purchases on their Card in a calendar year. To find a lounge, visit the membership section in the American Express® App or visit http://www.americanexpress.com/findalounge#/loungefinder.
- A Walmart+ membership can get you free shipping with no order minimum on eligible items shipped by Walmart. Use your Platinum Card® to pay for a monthly Walmart+ membership (subject to auto-renewal) and receive one statement credit for up to $12.95 (plus applicable taxes. Plus Ups not eligible) each month. Free Shipping excludes most Marketplace items, freight & certain location surcharges. Paramount+ Essential plan only, separate registration required.
- $200 Airline Fee Credit: Select one qualifying airline and then receive up to $200 in statement credits per calendar year when incidental fees, such as checked bags and in-flight refreshments, are charged by the airline to your Platinum Card® Account. American Express relies on airlines to submit the correct information on airline transactions to identify incidental fee purchases. If you do not see a credit for a qualifying incidental purchase on your eligible Card after 8 weeks, simply call the number on the back of your Card. Qualifying airlines are subject to change. See terms & conditions for more details.
- $200 Uber Cash: Platinum Card® Members can ride or dine in style with $15 in Uber Cash each month, plus a bonus $20 in December after adding their Card to their Uber account. Use your Uber Cash on rides and orders in the U.S. when you select an Amex Card for your transaction.
- $199 CLEAR® Plus Credit: CLEAR® Plus helps get you to your gate faster by using unique facial attributes to verify you are you at 50+ airports nationwide. Use the dedicated CLEAR Lane to confirm your identity without taking out your passport or ID - this can mean shorter lines, less waiting. Receive up to $199 in statement credits per calendar year after you pay for your CLEAR Plus Membership (subject to auto-renewal) with the Platinum Card®.
- Receive either a $120 statement credit every 4 years for a Global Entry application fee or a statement credit up to $85 every 4.5 years for a TSA PreCheck® (through a TSA official enrollment provider) application fee, when charged to your Platinum Card®. Card Members approved for Global Entry will also receive access to TSA PreCheck at no additional cost.
- Shop Saks with Platinum: Get up to $100 in statement credits annually for purchases in Saks Fifth Avenue stores or at saks.com on your Platinum Card®. That's up to $50 in statement credits semi-annually. Enrollment required.
- Use Global Dining Access by Resy to access premium dining experiences. Receive Priority Notify and unlock insider access to some of the world's most sought-after restaurants with Global Dining Access by Resy. Download the Resy iOS app or log into Resy.com and add your Platinum Card® to your Resy profile to take advantage of your special benefits and discover restaurants near you.
- $695 annual fee.¤
- Apply with confidence. Know if you're approved for a Card with no impact to your credit score. If you're approved and you choose to accept this Card, your credit score may be impacted.
- Terms Apply.
- Rates & Fees
- Earn 5X points for flights booked directly with airlines or with American Express Travel® (up to $500,000 in purchases per calendar year).
- Earn 5X points on prepaid hotels booked with American Express Travel®.
Note: Eligible charges can be included in a Pay Over Time balance, up to the Pay Over Time Limit. All charges not added to a Pay Over Time balance or monthly payment plan or Cash Advance balance must be paid in full each month by the payment due date. Pay Over Time only applies to eligible charges meeting minimum transaction amounts for certain cards.
Impact on your credit score
Credit scores are determined by multiple contributing factors — including your payment history, the average age of your credit, and your credit utilization. Credit utilization is the ratio of your outstanding debt to your total available credit. On a credit card, your credit utilization equals your current balance divided by the card's credit limit.
However, charge card usage is not factored into credit scores. Why? Because charge cards do not have preset spending limits. As a result, credit bureaus cannot calculate a charge card's credit utilization since you can't divide by zero. You can spend as much as you want on a charge card without affecting your credit utilization factor and damaging your credit score.
Even though spending on a charge card does not impact your credit score, applying for a charge card, paying your charge card's balance, and how long you've had the account will. Like credit cards, credit bureaus track these data points on charge cards.
Late fees
Both credit cards and charge cards assess late fees. Credit cards charge interest on top of the late fee. However, late payments, missed payments, or payments that don't cover the full balance on charge cards will cause greater scrutiny on your accounts with the card issuer. This could mean reduced charging ability or even terminating your ability to make additional purchases.
Additionally, paying just the minimum amount on a credit card will help you avoid late fees — although you'll still have to pay interest if you don't pay your credit card balance in full. However, you'll likely be assessed a late payment fee if you don't pay your charge card's balance in full.
Annual fees
Credit card annual fees can range anywhere from zero to hundreds of dollars. On the other hand, most charge cards have an annual fee.
No-annual-fee charge cards are typically not worth applying for. This is because the perks offered by no-annual-fee credit cards are typically better than those found on no-annual-fee charge cards.
Card approval chances
The chances of being approved for a credit card or charge card differ more according to the actual product and bank, rather than a simple credit card versus charge card comparison. For example, new applicants and those building credit can apply rather easily — and with decent approval odds — for the Chase Freedom Rise®.
On the other hand, Barclays is well known for lower chances of approval on its cards — such as the AAdvantage® Aviator® Red World Elite Mastercard® — if you don't have established credit or a good credit score.
Because most charge cards are marketed at higher-end customers, approval chances are typically lower than most credit cards when considering those who don't have strong credit profiles. For example, The Platinum Card® from American Express will typically require applicants to have a good credit score (which is generally defined as above 670, but more commonly above 700) to be approved.
Common Examples of Cards With No Preset Spending Limit
The Platinum Card® from American Express and American Express® Gold Card are two of American Express' most popular cards with no preset spending limit, meaning the amount you can spend adapts based on factors such as your purchase, payment, and credit history. You pay off the balance in full at the end of each billing cycle. This is unless you are enrolled in Pay Over Time with American Express. If you do not pay off your entire balance, American Express will charge a late fee Up to $40 (Rates & Fees) on the Amex Platinum and Up to $40 (Rates & Fees) on the Amex Gold.
But those aren't the only cards without preset spending limits. The American Express® Green Card and even business cards like American Express® Business Gold Card and The Business Platinum Card® from American Express fall into this category.
- 3x Membership Rewards® on travel
- 3x Membership Rewards® at restaurants worldwide, including takeout and delivery in the U.S.
- 3x Membership Rewards® on transit including trains, buses, ferries, subways, and more
- 1x Membership Rewards® on other purchases
Other credit card providers offer cards without preset spending limits. Chase's Ink Business Premier® Credit Card (Rates & Fees) and the Capital One Spark Cash Plus also have no preset spending limits. These charge cards do not have an option for paying a minimum amount; you must pay the balance every month.
Additionally, the late payment fees on these cards can be higher than what American Express charges. While the Ink Premier will charge $40 or 2% of the minimum payment due — whichever is greater — the Spark Cash Plus has a late payment fee of 2.99% of the unpaid portion.
- Earn a one-time cash bonus of $2,000 once you spend $30,000 in the first 3 months
- Earn an additional $2,000 cash bonus for every $500K spent during the first year. You can earn this bonus multiple times over the course of year 1!
- Earn unlimited 2% cash back on every purchase, everywhere-with no limits or category restrictions
- 2% Cash Back on every purchase. 5% Cash Back on hotels and rental cars booked through Capital One's travel booking site.
Bottom Line
While there are many similarities between credit cards and charge cards (those with no preset spending limits), there are some very important differences between the two. Those include what happens when you carry a balance — by not paying your entire bill that month — and how your spending can affect your credit score.
For rates and fees of the cards mentioned in this post, please visit the following links: The Platinum Card® from American Express (Rates & Fees), American Express® Gold Card (Rates & Fees), and Ink Business Premier® Credit Card (Rates & Fees)
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