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Charge Card vs Credit Card; they may look identical as they both serve the purpose of cashless payments but surprisingly, they are two different financial tools. They look identical while purchasing but they are different from one another in many ways. Before you apply for the card, it is crucial to know the dissimilarities between charge card vs credit card.

With a credit card, you carry the balance over time and can pay it with the additional interest charges. While for the charge card the balance should be paid in the full amount when the monthly bill statement arrives. The major distinctions for charge card vs credit card are in terms of payment and credit limits. Let’s deeper dive into the working of each card so that you can decide which type of card better fit your needs.

Charge Card vs Credit Card – Key Takeaways

Charge Card vs Credit Card – Key Takeaways
  • The integral difference between credit card and charge card is that on charge card the balance should be paid in full each month
  •  Unlike credit cards the charge cards do not have a preset credit limit. So it totally depend upon the issuer that we might approve or disapprove purchases based on your financial health
  •  When making a comparison between charge card vs credit card, charge card are not accepted widely like credit cards.

 How does a charge card work?

 Charge cards are not as popular as credit cards and only few banks offer them. For charge cards the spending limit is fluid. This means that the card issuer does not set a credit line but this does not mean that you have an unlimited spending limit. While considering your spending habits the issuer has the full right to allow or disallow a particular purchase.

 The right approach is that if you are planning to make a sizable purchase , contact the issuer to see if they approve the amount you would like to charge . For big spenders with great credit history, the approval is not a problem. One of the renowned credit card issuer American Express offers a tool in the online account to analyze your spending power. You just have to enter the amount of the sizable purchase to see if Amex will approve it or not.

 Charge cards usually develop responsible habits to pay the balance in full each month . If you will be unable to pay balance each month then there is a high risk of your card being closed.

 How does credit card works?

 Credit cards offer the ability make sizable purchases with the banks money and then reimburse it later with incurring interest rates. Upon approval for a credit card, you will receive a particular spending limit based on your credit score and other important factors. To get a high credit limit, it is important to make on-time payments . The main advantage is that you don’t have to pay the balance full each month . And if you are not able to make full payments there is no risk of account closing as long as you are making minimum monthly payments .

 Perks of Charge Card vs Credit Card

 Perks of Charge Card vs Credit Card

 The benefits of the charge card are dependent on the type of card issuer you have opted for. But the general benefits of these cards include the following:

  • The greatest benefit of this card is that you don’t have to pay interest charges on it. As cardholders pay their balance in full each month, so no incurring interest rates.
  •  Depending upon the type of charge card you have chosen they offer rewards. The rewards of these cards are in the form of points or other travel deals.
  •  Charge cards do not have a prescribed credit limit. So, if you have established good spending habits in the past, then there are higher chances that you get a higher credit limit.

Credit cards also offer a distinct set of advantageous if and only they are used responsibly. The set of perks the credit cards offer include the following:

  • The rewards on the credit cards are higher in number as compared to charge cards. The credit card rewards are usually in the form of cash back, travel miles , points, bonus and all other type of rewards.
  •  Credit cards offer you a great way to create credit-building opportunities for yourself. To have a positive impact on your credit history, make sure that you make on-time payments, keep your credit utilization to a bare minimum percentage of 30.
  • One of the greatest benefits of credit cards is they are accepted widely for payments all across the globe. Also, there are multiple credit card options for individuals who have a credit card score ranging from poor to excellent. Those with excellent scores can leverage the power of rewards but on the other hand those with limited score can rebuild their credit
  •  Credit cards offer an easy way to make big purchases. As people with great credit history can access the funds and can pay back later with interest charges.

Best Reward Credit Cards of 2024

 No matter whether you are a travel freak, foodie or a shopping freak , there are reward credit cards that can fit well your spending habits. With good to excellent credit score, you can opt for high rewarding cards with generous welcome bonuses and greater potential to maximize your earnings.

 Charge Card vs Credit Card – Key Differences

 Charge Card vs Credit Card – Key Differences
FeatureCharge CardCredit Card
Annual feeVaries by issuer, but typically higher than credit cardsVaries by issuer, ranging from no fee to high annual fees
Spending limitNo preset spending limit, but issuer may approve or deny purchases based on financial patterns and habitsPreset spending limit that determines the maximum amount you can borrow
Late payment feeLate fees apply if balance is not paid in full by due dateLate fees apply if minimum payment is not made by due date
Card selectionLimited number of issuers offer charge cardsWide variety of issuers offer credit cards with diverse features and benefits
Payment optionsFull balance must be paid in full each monthOption to carry a balance from month to month, accumulating interest charges

 Let’s delve into the dissimilarities of charge card vs credit card.

 Spending Limit

Before you go for a new credit card the issuer will set a credit limit so that you can spend before you make a payment. This is not the case with the charge card as it does not specify how much you can spend. Although there is a limit to how much you can charge but the number may vary as per your spending habits.

 Payment Options

 With charge card you have to pay your balance full each month before the due date. Failing to pay the charges would result in late fees , temporarily closure of account and even suspension of your account. But with a credit card, you carry the balance across various billing cycles and can pay the minimum monthly bills. Even some of the credit cards offer the option to carry the balance after enrollment.

 Credit Score Requirement

 To obtain a charge card the credit score should fall in the range from good to excellent . The credit score that is above 700 is considered good for charge card application. While credit cards can be obtained with a bad credit score too, the premium ones want good to excellent scores.

 Card Selection Options

 For the selection of the credit cards, there are multiple options for you. As most of the banks offer credit cards and few of them offer charge cards to the users. American Express offers no present-limit cards that include the American Express Gold Card as the favorable option. Capital One offers Capital One Spark Cash Plus as a no preset limit card that is specifically targeted towards business owners.

 Credit Utilization

Credit cards usually offer a firm spending limit and the amount of the limit is responsible for 30% of your FICO credit score. As the charge card has no limit to the usage won’t change the credit utilization and credit score.


 Credit cards and charge cards usually charge late payment, return payment and cash advance fees. Other than that, there are numerous credit card options that are available with no annual fees. The charge cards on the other hand comes with yearly cost of ownership.

 Depending upon the card you choose , you can also be charged foreign transaction and balance transfer fee. So Before opting for a charge or credit card beware of all the fee charges.

Charge Card vs Credit Card : Which option is better for you ?

Charge Card vs Credit Card ; Which option is better for you ?

Choosing between a credit card and charge card is dependent on your financial situation If you are the one who prefers to pay your balance in full each month, then a charge card is a preferable option for you. Charge cards usually develop good spending habits and prevents you from excessive spending.

In contrast for all those who have bad credit score can look for credit cards that offers them the option to rebuild their credit score. Not only this there are premium credit cards that offer 0% APR , cashback bonuses, airline miles to users with good to excellent credit score.

Frequently Asked Questions

What is the main difference between credit card and charge card?

 The charge cards don’t have a particular spending limit and the bills have to be paid in full each month. While credit cards offer a spending limit and allow you to carry balance each month.

 What are disadvantages of charge card?

 The charge card have high annual fee and there are few options among charge cards to avail . Charge cards can be availed by individuals with good to excellent credit score.

 How credit cards impact your credit score?

 The credit card impacts your credit score more than the charge card. As you apply for ta new credit card, with a hard inquiry the credit score will drop. And once you get approved the credit utilization for the new card is lower. But the credit score can be improved with the passage of time with on time bill payments and keeping your account opened for many years.


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