The main difference between a credit card and a charge card is that charge cards don’t allow you to carry a balance from one month to the next, 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.… read full answer
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.
Credit Cards vs Charge Cards: Main Differences
- Amount Due: Charge cards require you to pay your bill in full each billing cycle, while credit cards only require a minimum payment (a portion of your entire balance) and revolve the rest of your balance to the next billing cycle. Unless the credit card offers an introductory 0% APR though, you’ll have to pay interest on the unpaid portion of the balance.
- Credit/Spending Limit: Charge cards generally don’t have preset spending limits, while credit cards will assign a credit limit based on your creditworthiness.
- Debt, Interest and Fees: Charge cards will not allow you to accrue debt as you’re required to pay off your balance every month. Not paying your balance in full by the due date will attract considerable late fees though. Credit cards will only attract late fees if the minimum payment is not made by the due date. However, credit cards will accrue interest on any unpaid balance, unless they offer an introductory 0% APR for a certain period of time.
- Credit Score Impact: Credit utilization isn’t part of the scoring criteria for charge cards, as they have no preset spending limit. Credit utilization for credit cards, on the other hand, is recommended to be kept no higher than 30-40%.
- Annual Fees: Charge cards tend to charge high annual fees, while credit cards make for a more diverse offering, covering the whole spectrum of credit, from bad and limited, to excellent credit.
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) |
| Late Payment Fees | Generally Yes | Generally Yes |
| Interest | Generally No | Generally Yes |
| Annual Fee | Generally Yes | Depends on the card, increased diversity of offers |
| How Spending is Reported for Credit Utilization | Highest balance in account History + monthly statement balance | Statement balance – credit utilization isn’t considered for charge cards |
| Offered By | American Express WEX | 15 of 15 largest banks and credit unions |
| Min. Credit Score Needed | Generally Good credit | No credit / Bad credit |
Some hybrid cards do have some sort of short-term financing. For example, American Express has a feature called "Pay Over Time" on some of their cards. That lets you carry a balance between months on certain eligible charges, with interest, up to a limit. Not all cardholders are eligible and all charges that are not included in the Pay Over Time balance must be paid in full by the due date.
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.
2023’s Best Charge Cards vs. Best Credit Cards
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.
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