WalletHub, Financial Company
@WalletHub
When you look at a charge card vs. a credit card, the most important difference is that charge cards don’t allow you to carry a balance between months, while credit cards do. Both types of cards allow you to buy now and pay later, but charge cards require that payment to be for the full amount you owe at the end of the billing cycle. Traditional credit cards require you to pay just a portion of your balance by the due date each month to keep your account in good standing.
It’s important to note that a charge card actually is a type of credit card – just a unique one. Charge cards and other credit cards are different in more ways, too. For example, charge cards are more likely to have no preset spending limit. That doesn’t mean you have no limit, just that you won’t know your limit.
It’s good to be aware of all the major similarities and differences between charge cards and credit cards so you can make an informed decision about which to get.
Charge Card vs. Credit Card:
Category |
Charge Card |
Credit Card |
Source of Funds |
Open line of credit |
Revolving line of credit |
Amount Due Monthly |
Full balance |
Minimum payment |
Credit Limit |
No preset spending limit (usually) |
Static credit limit (usually) |
How Spending is Reported for Credit Utilization |
Highest balance in account history+ monthly statement balance |
Statement balance |
Offered By |
15 of 15 largest banks and credit unions |
|
Min. Credit Score Needed |
One more major difference between charge cards and other credit cards is the consequence of not paying your monthly bill in full. With a credit card, if you don’t pay in full but make the minimum payment, you’ll just owe interest on the remaining balance. But if you don’t pay a charge card in full, you’ll get hit with late fees. Eventually, you might be restricted from making new purchases until you pay past-due amounts, too.
Some charge cards do have short-term financing. For example, American Express has a feature called “Pay over Time” on some of their charge cards. That lets you carry a balance between months on certain charges of $100 or more, with interest, up to the Pay Over Time Limit. You must also call Amex and have them approve the charge as “pay over time” after you make it. There is no overall time limit to pay your charges back, but you will have a monthly minimum payment. Not all cardholders are eligible.
Now that you’re familiar with the fundamental differences between charge cards and credit cards, you can take a look at some of the best that both types have to offer.
2021’s Best Charge Cards vs. Best Credit Cards
Best For… |
Best Charge Card |
Best Credit Card |
Winner |
Travel Rewards |
|||
Cash Back |
N/A |
||
No Annual Fee |
N/A |
||
Businesses |
|||
0% APR |
N/A |
||
Building Credit |
N/A |
Overall, credit cards tend to be better than their charge card counterparts for most people. Credit cards provide financing capabilities, for one thing, and some of them are much easier to obtain. Charge cards can be very attractive to a certain segment of the market, though – people with good or better credit who always pay in full and want premium rewards.
Mena Jesston, Member
@mena_jesston
The main difference is that with a credit card you can pay back a minimum amount each month, whereas with a charge card you must pay back the entire amount you spend each month.
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