Charge Cards vs. Credit Cards: What’s the Difference?

When it’s time to pay, the difference between charge cards and credit cards is clear

Many people use credit cards these days, but charge cards are still an option. The difference between how charge cards and credit cards work is a big one—especially when it comes to monthly payments.

Think of an alarm clock. With a charge card, you have no choice but to wake up—and pay up—completely. But a credit card comes with a “snooze button.” If there’s a reason you can’t pay in full, you can make at least the minimum payment and pay your balance over time. Read on for more information.

How Are Credit Cards Different From Charge Cards?

On the outside, charge cards and credit cards can be very similar. You might not hear about charge cards as much as credit cards, but they’re still around—even if they aren’t always advertised as much as credit cards are.

You can make purchases with either card in almost exactly the same way. And the cards often look the same. However, there are some key differences between credit cards and charge cards. Knowing them can help you decide which is right for you. 

Here are some of the similarities and differences: 

  Charge Card Credit Card
Preset Spending Limit Typically no Typically yes
Payment Requirements Usually paid in full monthly Must make at least the minimum monthly payment
Late Payment Fees Typically yes Typically yes
Annual Fees Typically yes, but some may be waived in the first year Depends on the card
Availability Limited number of issuers Lots of issuers to choose from


Charge Card Features

Charge cards can have benefits for consumers if the cards are used responsibly. For example, they often have no preset spending limit.

Additional benefits will vary based on the specific card and issuer, so it’s a good idea to do some research before applying. But here are a few potential perks:

No Interest

Charge cards typically do not charge interest. But there’s a catch: Typically, the card balance must be paid in full every month. And if the balance is not paid off, there might be additional fees.

Some issuers may allow you to make only a minimum payment. If that’s the case, you could pay interest on the unpaid portion of your balance.


Charge cards may offer rewards. Depending on the card, they could come in the form of cash back, rewards points or travel miles.


Charge cards might also affect your credit scores differently than a typical credit card does. With credit cards, your credit utilization ratio—which measures how much of your available credit you’re using—can affect your credit scores. Because charge cards do not typically have credit limits, credit utilization may not be a factor. It’s a good idea to check with the card issuer, though.

But, like with credit cards, it’s still important to make payments on time with your charge card. Not doing so could negatively affect your credit.

Considerations for Charge Cards

There are several things to consider when applying for or using a charge card. First, it’s important to be aware of any potential fees. You may also want to consider whether you’ll be able to pay off the balance in full each month and how it could affect your credit.

Potential Late Fees

Unlike a credit card, which allows you to carry a balance month to month, charge cards usually must be paid in full every month. But like a credit card, you may be charged a late fee if you carry a balance on a charge card. And too many late fees could result in the account being suspended or closed. There could also be negative effects on your credit scores.

Annual Fees

Many charge cards come with an annual fee. While certain charge cards might waive the fee in the first year, it may be good to keep in mind this additional cost when considering a charge card. Remember, some credit cards may also have annual fees. 

Credit Profile

Like with a credit card, to qualify for a charge card, your credit history is important. Charge cards often require at least a good credit score, and your credit scores may be affected if you apply for a charge card. So if you’re new to credit or rebuilding credit, you may want to consider other options like a secured credit card.

Choosing Between a Charge Card and a Credit Card

Both charge cards and credit cards may offer benefits that can help you build credit and earn rewards. Before making a decision, take time to review the benefits and requirements of both types of cards—and be sure to review the agreement for whichever card you end up using. 

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