Credit Card Debt & Loans

What Is the Difference Between A Charge Card and A Credit Card?

What Is the Difference Between A Charge Card and A Credit Card?
Reviewed by Nima Vahdat
Updated November 1, 2023

A charge card is a form of credit that differs from a credit card, requiring payment in full at the end of each month.

You might have encountered the terms “charge card” and “credit card” being used interchangeably, but they are not the same. 

On the surface, they may look identical and make purchases in the same way, but in reality, charge cards are fundamentally different from credit cards. 

Before you apply for one or the other, it’s imperative you know what they are.

Below, you’ll discover the subtle yet crucial differences between charge cards and credit cards, empowering you with the knowledge to make informed financial decisions. 


  • Charge Card Basics – Charge cards require you to pay your balance in full each month, offering no revolving credit.
  • Credit Card Flexibility – Credit cards provide the flexibility to carry balances over time, subject to interest charges.
  • Credit Impact – Both charge cards and credit cards can impact your credit score, but they do so differently.

Charge Cards and Credit Cards Are Often Used Interchangeably

It’s a common misconception, and you’re not alone if you’ve ever used the terms interchangeably. 

Both types of cards are ubiquitous in the financial world, and their similarities can often blur the lines between them. 

However, understanding the key differences is essential for responsible financial management.

What’s a Charge Card?

Charge cards are used to complete purchases. 

Some charge cards have point systems and perks, similar to credit cards. 

A charge card requires you to pay your statement balance in full each month, essentially eliminating the option to carry a balance from one month to the next. 

American Express is a well-known issuer of charge cards.

Certain retailers provide charge cards designed exclusively for making purchases within their stores. However, it’s important to note that, in many instances, these have been substituted with credit cards.

How Does A Charge Card Work? 

Charge cards, which used to be more common but are now issued by only a few banks, have several unique features that may seem unfamiliar if you’ve primarily used credit cards.

One significant difference is that your spending limit is not fixed. In other words, you don’t have a predetermined credit line. Instead, the amount you can spend varies based on your spending patterns. 

If you tend to make substantial purchases, your card is unlikely to be declined, even for larger expenses. 

Some issuers, like American Express (Amex), provide a tool in your online account to assess your “spending power.” You can enter a specific amount, and Amex will inform you whether a purchase of that size will be approved.

Another distinctive aspect of charge cards is that they necessitate full payment of your balance every month. Failing to do so can result in late fees and the possible closure of your card.

Usually, to qualify for a charge card, you’ll need a good-to-excellent credit score. This is because the issuer is assuming a higher risk, counting on you to pay your complete bill monthly without a preset spending limit. 

If you have a limited or poor credit history, it might be more suitable to consider a secured card instead.

What is a Credit Card?

A credit card is a revolving line of credit that allows you to carry a balance from month to month, subject to interest charges.

Unlike charge cards, credit cards have a spending limit that varies from one card member to the next. 

Visa and Mastercard are popular credit card networks.

How Do Credit Cards Work? 

Credit cards, much like charge cards, grant you the ability to make purchases using the bank’s funds, which you must repay later.

Upon approval for a credit card, you are given a specific spending limit determined by your creditworthiness. 

As you make purchases, your credit limit decreases. However, you can choose to pay off all or a portion of your credit card balance, freeing up some of your credit lines for further use. 

For example, an individual with a $8,000 credit line could theoretically spend up to $10,000 in a month, provided they promptly pay off their card after making purchases. 

It’s important to note that some credit card issuers may not favor exceeding your credit line in a single month.

Unlike charge cards, you are not required to pay off your credit card balance in full each month. 

If you cannot pay the entire balance, you won’t default on the card as long as you make the minimum payment, which is typically a fraction of your balance. 

This convenience makes racking up credit card debt a breeze, so it’s not good if you don’t have a handle on your spending!

The Principal Differences Between Credit Cards and Charge Cards

Charge cards and credit cards may sound similar, but there are some key differences regarding monthly payment requirements, spending limits, interest charges, etc.

1. Monthly Payment Requirement

Credit Card: A credit card gives you the flexibility to pay a minimum amount due, a portion of the balance, and carry the outstanding balance over to the next month. While this flexibility can be convenient, it can also lead to high-interest charges if you’re not diligent about paying off the balance in full.

Charge Card: In contrast, charge cards require you to pay the full statement balance each month. Because of that, charge cards typically do not offer 0% interest promotional periods, and they are not suitable for balance transfers. This feature encourages responsible spending and can help you avoid accumulating debt.

2. Credit Limit vs. No Pre-Set Spending Limit

Credit Card: Credit cards come with a pre-set credit limit, which limits the maximum amount you can charge. The limit can vary based on your creditworthiness and the card issuer’s policies.

Charge Card: Charge cards typically have no pre-set spending limit. Instead, the issuer evaluates your spending patterns, payment history, and financial stability to determine the maximum amount you can charge. This dynamic limit can adapt to your financial circumstances.

3. Interest Charges

Credit Card: If you carry a balance on your credit card, you’ll incur interest charges on the unpaid portion. The interest rate, also known as the Annual Percentage Rate (APR), varies among credit cards and can significantly impact your overall debt.

Charge Card: Since charge cards require full payment each month, they don’t impose interest charges on carried balances. This feature can save you money and promote financial responsibility.

4. Card Selection

Credit cards are far more abundant in terms of options compared to charge cards. Virtually all card issuers provide credit cards, whereas the availability of charge cards is quite limited.

Charge Cards vs. Credit Cards: How They Affect Your Credit

Both cards can impact your credit score. However, they do so differently…

Credit Card: Credit card usage influences your credit utilization ratio (the amount of credit you’re using compared to your credit limit). A high credit utilization ratio can negatively affect your credit score.

Charge Card: Charge cards don’t contribute to your credit utilization ratio because they have no pre-set spending limit. However, they can still influence your credit score based on your payment history and overall financial stability.

Final Thoughts Regarding the Difference Between Charge Cards and Credit Cards

In conclusion, while charge cards and credit cards share similarities, their fundamental differences can significantly affect your financial approach. 

Charge cards promote disciplined spending by requiring full monthly payments, while credit cards offer flexibility but require vigilant management to avoid high-interest charges.

At Americor, we understand the importance of managing your finances wisely. 

As America’s trusted source for debt relief solutions, we aim to empower you with financial knowledge that can lead to informed decisions, whether it’s about savings, investments, or managing debt.

If high-interest debts are impacting your savings, investments, and financial well-being, explore our debt relief solutions, including debt settlement and debt consolidation, to regain control of your financial future.

If your debt has become unmanageable and you have difficulty making your debt payments each month, then you should consider a free consultation call with one of our certified Debt Consultants, who can provide personalized advice tailored to your specific needs.

By taking proactive steps today, you can put an end to your financial stress and work towards a brighter financial future. 

Remember, there is always hope for debt relief, and our team of experienced professionals are ready to guide you on your journey to regaining control of your finances.

For more information on Americor’s debt relief services, contact us today to see how we can help you eliminate your debts, and get on the fast-track to becoming completely debt-free!