Charge Card vs Credit Card | Credit Cards 101

In this article, we’re comparing a charge card vs a credit card and looking at all the differences and similarities.

Additionally, we will also be answering common questions that we receive about charge cards and credit cards below.

This article is part of our free series on US credit products, including how to get US credit cards for foreigners, which you can access here.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

1. Charge Card vs Credit Card
2. What Are the Advantages of a Charge Card vs a Credit Card?
3. What Are the Disadvantages of a Charge Card?
4. Frequently Asked Questions
5. Ready to Open Accounts With Banks in the USA?

Charge Card vs Credit Card

The main difference between a charge card and a credit card is that a charge card typically requires full payment prior to the due date while a credit card only requires a minimum payment by the due date. 

In other words, a charge card requires immediate payment while credit cards offer more flexible repayment options. However, both charge cards and credit cards offer grace periods prior to the payment due date of each billing cycle.

Also, while credit cards tend to have a preset credit limit, charge cards tend to have more fluid credit limits. As a result of not having a credit limit, charge cards do not impact an individual’s credit utilization score. However, each new credit card will impact the credit utilization ratio, which can help improve credit history.

Importantly, there are many similarities between charge cards and credit cards as well, including that many charge cards and credit cards offer a rewards program. Of course, those cards that offer rewards also tend to have annual fees.

Additionally, both charge cards and credit cards charge late fees for missed payments. They also offer cardholders a wide range of payment methods for meeting their payment obligations. Lastly, charge cards and credit cards both offer purchase protection. And, when it comes to making purchases, they offer a wide range of spending flexibility in terms of online, in-person, and card-not-present payments.

To learn more about what the application process looks like and how long it takes to get a credit card, check out our free guide linked here.

What Are the Advantages of Charge Cards & Credit Cards?

The advantages of charge cards and credit cards will vary slightly depending on the individual cardholder’s objectives.

For example, while an individual looking to maintain a minimum balance of debt each month will benefit from a charge card, individuals wanting to access an unsecured form of short-term financing will benefit from a credit card.

Here is a closer look at the advantages of both charge cards and credit cards.

Advantages of Charge Cards

• No revolving debt accumulating interest
• Supportive of financial discipline
• No concern about interest charges
• Allows the cardholder to build credit responsibly
• Access to lucrative rewards and benefits
• No preset spending limits

Advantages of Credit Cards

• Access to short-term credit facilities
• Allows for more flexible repayment
• Can positively impact credit score through credit utilization
• Helps build good credit when used responsibly
• Usually easier to qualify for than charge cards
• Lower annual fees than charge cards

What Are the Disadvantages of Charge Cards & Credit Cards?

The disadvantages of charge cards and credit cards also vary slightly depending on the individual cardholder’s objectives.

For example, while a charge card doesn’t have a preset credit limit, it also won’t help improve a credit utilization score which can improve a person’s credit score. On the other hand, a credit card does increase the total credit available to a person and therefore does improve credit utilization and credit scores.

Here is a closer look at the disadvantages of both charge cards and credit cards.

Disadvantages of Charge Cards

• Full payment on the card each month
• Does not positively impact credit utilization
• No access to revolving credit
• Higher annual fees
• Often harder to get approved for

Disadvantages of Credit Cards

• Risk of debt accumulation
• Interest rate charges are applied to the balance
• Allows for overspending
• Complicated terms and conditions
• Risk of damaging your credit score

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Frequently Asked Questions

Below are three of the most common questions we receive from people looking into the difference between a charge card vs a credit card. If you have further questions you would like to ask our team, don’t hesitate to get in touch.

What Is Better: A Charge Card or a Credit Card?

Whether a charge card or a credit card is better for your situation depends on your objectives, desired credit balance, ability to pay your monthly balance, and ability to qualify for the various card options.

Why Would Anyone Use a Charge Card?

Charge cards offer an easy payment method for completing transactions without accumulating debt and incurring interest payments. Additionally, many charge cards offer lucrative rewards programs, retail bonuses, and other perks that make them an attractive proposition for individuals that do not require access to short-term credit facilities.

Why Use a Charge Card Over a Credit Card?

Individuals may choose to use a charge card over a credit card if they do not want to accumulate debt or pay interest. Instead, they may just be looking for a payment card option that allows them to build credit, accumulate travel rewards points, and earn additional bonuses.

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