Charge Card vs Credit Card - What's the Difference? Charge Card vs Credit Card - What's the Difference?

Charge Card vs Credit Card - What's the Difference?

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Charge cards and credit cards are commonly mistaken as the same product. They have similar application processes, both will usually perform a hard pull on your credit score, and stylistically they have similar card designs. However, the fundamental difference between the two is the ability to carry a balance from month to month. Only a credit card allows debt to be paid over time — with added interest, of course. A charge card, on the other hand, must be paid in full every month. If the balance on a charge card is not paid off, the account holder may quickly find their card will no longer work.

While they have many similarities, charge cards and credit cards also have important differences. Let's take a look.

Key differences between charge cards and credit cards

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. Charge cards are a great tool should the need for 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 — thus increasing credit utilization, which will negatively impact your overall credit score.

However, the lack of preset spending limits on charge cards does not equate to unlimited spending ability. The card issuer will still set limitations based on variables like payment history, financial resources, and credit score. Just check online or call before attempting a large purchase to confirm your current purchasing power. Additionally, 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 advice, there shouldn’t be much of a difference in how you use any charge or credit card.

Related: A Beginner's Guide to Building Healthy Credit

an unseen person puts a wallet into their jacket pocket
Credit: Clay Banks/Unsplash

Interest rates

Credit cards allow account holders to carry a balance and simply pay interest if they make only the minimum payment or pay less than the full balance that month. If a minimum payment is not met, credit card holders are charged both interest and late fees.

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.

The Platinum Card® from American Express
The Platinum Card® from American Express
Apply Now
Rates & Fees
(Terms apply)
The Platinum Card® from American Express
Annual Fee$695
Welcome Offer Earn 80,000 Membership Rewards® Points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership.
  • Earn 80,000 Membership Rewards® Points after you spend $8,000 on purchases on your new Card in your first 6 months of Card Membership. Apply and select your preferred metal Card design: classic Platinum Card®, Platinum x Kehinde Wiley, or Platinum x Julie Mehretu.
  • 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 with American Express Travel when you pay with 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, SiriusXM, and The Wall Street Journal. Enrollment required.
  • $155 Walmart+ Credit: Cover the cost of a $12.95 monthly Walmart+ membership (subject to auto-renewal) with a statement credit after you pay for Walmart+ each month with your Platinum Card®. Cost includes $12.95 plus applicable local sales tax. Plus Up Benefits are excluded.
  • $200 Airline Fee Credit: Select one qualifying airline and then receive up to $200 in statement credits per calendar year when incidental fees are charged by the airline to your Platinum Card®.
  • $200 Uber Cash: Enjoy Uber VIP status and up to $200 in Uber savings on rides or eats orders in the US annually. Uber Cash and Uber VIP status is available to Basic Card Member only.
  • $300 Equinox Credit: Get up to $300 back in statement credits per calendar year on an Equinox membership, or an Equinox club membership (subject to auto-renewal) when you pay with your Platinum Card®. Enrollment required. Visit to enroll.
  • $189 CLEAR® Plus Credit: Breeze through security with CLEAR Plus at 100+ airports, stadiums, and entertainment venues nationwide and get up to $189 back per calendar year on your Membership (subject to auto-renewal) when you use your Platinum Card®. Learn more.
  • $100 Global Entry Credit: Receive either a $100 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 on your Platinum Card®. That's up to $50 in statement credits semi-annually. Enrollment required.
  • $300 SoulCycle At-Home Bike Credit: Get a $300 statement credit for the purchase of a SoulCycle at-home bike with your Platinum Card®. An Equinox+ subscription is required to purchase a SoulCycle at-home bike and access SoulCycle content. Must charge full price of bike in one transaction. Shipping available in the contiguous U.S. only. Enrollment Required.
  • Unlock access to exclusive reservations and special dining experiences with Global Dining Access by Resy when you add your Platinum Card® to your Resy profile.
  • $695 annual fee.
  • 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.

Impact on your credit score

Credit scores are determined by multiple contributing factors, including payment history, the age of your credit, and credit utilization. Credit utilization is the ratio of your debt to available credit (current balance on your credit card divided by the card's credit limit). While the amount spent using credit cards is factored into credit utilization, charge card usage is not factored into credit scores. Why? Because they 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 0. You can spend as much as you want on a charge card and it will not affect the credit utilization factor of 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 impact your credit score. Like credit cards, credit bureaus have the ability to track these data points for charge cards.

Late fees

Both credit cards and charge cards assess late fees. Credit cards will additionally charge interest on top of the late fee, while late, missed, or payments that don't cover the full balance on charge cards will likely cause stricter scrutiny on your overall relationship with the card issuer. This could mean reduced charging ability or termination of accounts.

Additionally, paying just the minimum amount on a credit card (sometimes as low as $25) will help you avoid late fees, even though you'll pay interest if you don't pay your card's balance in full. In contrast, making a small payment that doesn't cover your charge card's full balance can lead to a late payment fee — even though you made a payment before the deadline.

Annual fees

Depending on the credit card, the annual fee can range from zero to hundreds of dollars. On the other hand, charge cards typically have an annual fee. That being said, there are charge cards with no annual fee. However, the current no-annual-fee charge cards on the market are typically not worth applying for because the perks offered by no-annual-fee credit cards are typically better than those found on no-annual-fee charge cards.

a customer pays by mobile wallet inside a small shop
Both charge cards and credit cards can be used with mobile wallets. Credit: Christiann Koepke/Unsplash

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 Discover it® Cash Back or Chase Freedom Rise℠. On the other hand, Barclays is notorious 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.

Related: What Credit Scores Get Approved for Top Rewards Credit Cards?

Because most charge cards are typically marketed at more luxury markets, 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 (above 670, but more commonly above 700) in order 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 Amex's most popular cards with no preset spending limit. You pay off the balance in full at the end of each billing cycle, unless you are enrolled in Pay Over Time. If you do not pay off your entire balance on these cards, Amex will charge a late fee: Up to $40 (Rates & Fees).

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.

American Express® Green Card
American Express® Green Card
American Express® Green Card
Annual Fee$150
Welcome Offer Earn 40,000 Membership Rewards® Points after you spend $3,000 on purchases on your new Card in your first 6 months of Card Membership.
  • 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, subway, and more
  • 1x Membership Rewards® on other purchases

And these cards exist outside American Express, as well.

Chase's Ink Business Premier℠ Credit Card 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 and require you to pay the balance in full each month. Additionally, the late payment fees on these cards can be higher than what Amex 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.

Bottom Line

Credit cards and charge cards run the full gamut from “no annual fee with minimal benefits” to “luxury cards with tons of perks.” While there are many similarities between credit cards and charge cards (those with no preset spending limits), there are some important differences. 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)

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  • Stumbled upon this post linked through a more recent post (Beginner’s Guide to Credit Card Application Rules) and had NO idea there was an actual difference between a charge/credit card! This whole time I thought the two were synonymous.

    While I used to use my credit cards sparingly and only in emergencies (which often meant carrying a balance for a short period of time), this site has taught me how to use my cards wisely to maximize rewards, which has made a HUGE difference in less than ONE YEAR! I am forever grateful for always being able to log on here and learn something new every time. Thanks!

  • personally act like every credit card is a charge card anyway to always pay full balance so its not a difference i really care to much about

  • Credit cards offer you a great deal of consumer protections. You just have to pay the full balance by the full payment deadline.

  • I agree that if you have to worry about APR on a card then you shouldn’t be using any credit card that has miles, etc as a benefit.
    I have two boys that I am teaching about credit cards and it is tough. They see me use them all the time and so they think that we always have the money for whatever they want. But I’ve started showing them how much is on each card and how much money I make, etc so I know that I can pay it off and what happens if I don’t.
    It’s really important to understand any type of card you carry or are looking to get. I think too many people don’t understand how it all works. Thank you for an explanation.

  • Do charge cards come with the same protections against fraud as credit cards do?

  • Thank you for clarifying the differences between charge cards and credit cards. It is subtle but is important for all of us to understand so we can effectively manage our finances.

  • Use your credit cards as if they were charge / debit cards.

  • I always pay my credit cards bill in full each month.
    Not having the need to do huge expenses I don’t care to much about having a credit card or a charge card.
    I think for a company or a business person this will have an impact.

  • Couldn’t agree more! Currently I only have credit cards, but I pay them off every month. I guess I could look into a charge card at some point if I need to have more flexibility.

  • worldtraveler73 says:

    Do any long term charge card holders have greater success with a higher spending limit on a charge card versus their personal credit cards?

    My credit limit on my credit card is about 4X my usual monthly spend. There isn’t any way that I’ll usually hit that with a large purchase (save a deposit on a card once every 5 years)

  • All my credit cards are charge cards in my mind…though I think only one of them is a truly a charge card. As soon as you start paying interest, the benefits of the points earnings are negated this hobby is actually very expensive. When I”m talking about miles and points cards with someone and they ask me “what is the APR on the card/” I know this is not the hobby for them.

  • I never considered a charge card except when AMEX sent me a targeted offer. Credit cards have much better rewards options available

  • Yeah, I never carry a balance on my numerous credit cards, but a charge card might work in some situations. At the end of the day, just remember it’s still YOUR money you are spending – if you think of it as cash, you might think twice before buying something…..

  • Is there any other card issuer other than AmEx that offers charge cards?

  • Theresa Harris says:

    Good explanation… ive never paid attention to the differences as I do not carry a balance. I guess I do own a charge card actually… as well as several credit cards.