What is the Difference Between a Charge Card and a Credit Card?

Updated June 08, 2021

People often use the terms charge card and credit card interchangeably. Both card types usually come with similar features, including earning rewards and travel perks. There are also several key differences between a charge card and a credit card. 

Knowing the differences between the cards can help determine which one is better for you. 

How Credit Cards and Charge Cards are the Same

Charge cards used to be more prevalent, but most card issuers now offer credit cards exclusively. American Express is the only major credit card company that still offers charge cards. 

Currently, Amex has three charge cards you can apply for -- The Platinum Card® from American Express, American Express® Gold Card, and American Express® Green Card. There’s also the Centurion Card from American Express, though it’s only available by invite. 

Despite fewer options, charge cards have some similarities with credit cards.

Purchases Work Similarly with Charge Cards and Credit Cards 

While charge cards aren’t as common as credit cards, you can use them the same way to make purchases. Also, both options allow you to make a purchase now and pay it off later. You can use a charge card to make purchases in stores and online the same way you would your favorite credit card. They are widely accepted at most retailers.

You can Earn Rewards

You’re probably familiar with rewards credit cards, but you can earn valuable rewards with charge cards too. For example, with the American Express Gold Card, you can earn 4X points at restaurants and U.S. supermarkets. Some of the highest rewards rates on the market are found with Amex charge cards.

Both Cards Offer Extra Perks

Another common thread between charge cards and credit cards is extra travel benefits. The Amex Platinum Card gives you access to airport lounges around the world, elevated hotel loyalty program status, and a Global Entry or TSA Precheck fee credit. Similar to top travel rewards cards, none of the Amex charge cards carry foreign transaction fees. 

How Credit Cards and Charge Cards are Different

With all these features in common, you may wonder if there’s even a difference between the two cards. The truth is they are quite different, and those differences will likely play a massive role if you're trying to choose between the two options. 

Charge Cards Require You to Pay in Full

Charge cards require you to pay your balance in full each month. There are no minimum monthly payments. In some cases, Amex cardholders can opt-in for its "Pay Over Time" feature, which allows you to extend repayment on some purchases over time while paying interest charges and an extra fee. 

Charge Cards Don’t Have Set Spending Limits

Unlike credit cards, charge cards don’t come with a specific credit limit. That doesn't mean you can spend on the card as you please. Instead, purchases are approved based on factors like your payment history, credit record, and other financial markers. 

Most Charge Cards Don’t Charge Interest

Although American Express started offering its "Pay Over Time" feature recently that charges APR, typically charge cards don’t come charge interest. Because you pay the full balance each month, card issuers have no reason to charge interest. If you do carry over a balance, you could face stiff fees. 

Charge Cards Often Come with Expensive Annual Fees

Charge cards come with some of the highest annual fees on the market. Some credit cards also charge an annual fee, but you can also find no-fee rewards credit cards. Fees on Amex charge cards range from $150 to $550. 

You May Need Better Credit to Qualify for a Charge Card

Because of the unique payment structure, charge cards tend to have strict credit requirements. You usually need good to excellent credit to qualify for a charge card. 

Is a Charge Card Better than a Credit Card?

The better choice may depend on your spending habits and how likely you are to pay off your balance each month. 

If you like the freedom of carrying over a balance from month to month, a credit card is the better option, however, you will pay interest on your balance if you don't pay in full. 

However, if you can pay your balance each month, a charge card could allow you to make larger purchases beyond a credit card’s credit limit. 

Both card types offer opportunities to earn rewards and gain access to valuable travel benefits.

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Mark Herman has been helping friends with financial questions since serving as an Army helicopter pilot. Since then, he’s gained valuable experience in the corporate world before moving on to become a CERTIFIED FINANCIAL PLANNER™.

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