The Difference Between a Charge Card and a Credit Card

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Though people often use the names interchangeably, credit cards and charge cards are two different things. Both cards help you make purchases without using cash, but only one of the cards allows you to carry a balance from month to month.

The Big Differences

A charge card works as a type of credit card that requires you to pay your balance in full at the end of each billing cycle, rather than making monthly minimum payments on the balance over several months. Charge cards force you to be responsible with your spending because you have to pay your balance off at the end of each and every month.

A credit card, on the other hand, allows you to have a revolving balance that you can pay off over a period of time. The convenience of making minimum payments attracts consumers, and some find themselves getting quickly into credit card debt.

Some charge cards don’t have a preset credit limit, giving you a seemingly limitless amount of credit. However, charge card issuers do have a soft spending limit for your charge card. Your spending limit is based on what the credit card issuer thinks you can afford to repay each month based on a number of factors including your income, spending and payment habits. Few banks issue charge cards, and you'll probably find American Express as one of the few actual charge cards.

Credit cards, on the other hand, have a set credit limit that's established when you're approved for the credit card. The credit limit often stays the same, unless you're approved for a credit limit increase or your credit card issuer lowers your credit limit.

You may receive penalties if you exceed your credit limit. For example, you’ll pay an over-the-limit fee and sometimes have your interest rate increased for exceeding the credit limit on your revolving credit card.

You typically need to have excellent credit to receive a charge card. You can likely get at least some credit cards, though, regardless of whether your credit history ranges from bad credit to excellent credit.


You won’t pay any interest on a charge card balance because the card company won't let you carry a balance beyond the grace period. However, you’ll face a steep penalty if you don't pay your full balance by the due date. The late fee could be a flat fee or a percentage of your balance, depending on the card terms.

Credit cards also have a late fee that’s charged when you don’t make your minimum payment by the due date. By law, the late fee on a credit card can be a maximum of $35, and only if you've missed two consecutive payments.

Charge cards don’t have an interest rate, so that’s one factor you can take out of the equation when you’re shopping for a charge card. Credit cards, however, do have an interest rate. The credit card interest rate is one of the most important credit card features since the interest rate directly influences how much you pay for carrying a balance on your credit card. You can avoid paying interest on a credit card by paying the balance in full each month before the grace period ends.

Charge cards usually have an annual fee that might be waived in the first year. Annual fees vary depending on the card but could be as high as $500 for high-end charge cards. Some credit cards also have an annual fee, but it’s easy to find a good credit card that doesn’t have an annual fee.

Charge Card Restrictions and Benefits

Charge cards don't allow you to carry balances or make cash advances. If you're interested in having the ability to make either of these transactions, you'll need to have a credit card.

Charge cards sometimes come with additional benefits not typically offered by regular credit cards. For example, your charge card may offer roadside assistance, extended warranty on certain purchases, car rental insurance, purchase protection, and travel accident insurance.