How Is a Charge Card Different from a Credit Card and Which Should I Use?

Tylene Welch
Woman smiling and looking ahead as she uses a laptop with a credit card in her hand.

Charge cards and credit cards are often referred to interchangeably, however there are some key differences between the two. If you’re looking into getting a credit card, but you can’t get approved for a line of credit or you’re considering alternatives — you might consider a charge card instead.

Table of Contents

What Is a Charge Card?

Charge cards look identical to credit cards, and are used exactly the same way. The key is that fundamentally, they operate differently. They both might offer some sign-on features, like bonuses, rewards, or travel perks. But charge cards are designed to be paid off, in full, every single month. Since a charge card doesn’t work with credit, they can’t allow you to make purchases on credit that you plan to pay off later. With a charge card, you’ll never pay interest, but there could be other hefty fees that make up for it.

There are pros and cons to each type of card, and choosing the best one for you depends largely on your budget and spending habits. These are the main differences a charge card has to a credit card.

The Main Differences Between a Charge Card and a Credit Card

Spending Limits

The biggest difference you’ll notice regarding charge cards vs. credit cards will be the spending limits, or lack of. Charge cards don’t have a spending limit like credit cards do. So if you’re looking for a high-limit credit card, the charge card might be a better choice.

Most credit cards have spending limits, even if you can personally afford to spend more than your card limit. The downside is maxing out your credit card, or getting close to the spending limit, can have a negative effect on your credit score. You can also get hit with fines when you reach your spending limit. Some credit card issuers will let you opt-in to be able to exceed the spending limit, but you might get charged a fee every time you do.

While a charge card with no spending limit might be appealing, you must be able to pay off the entirety of the card every single month, or you will get hit with large fees. You’ll also need to read fine print carefully as some charge cards may still limit your purchasing power based on your income, credit, payment history, debts and other factors.


We’ve mentioned charge cards must be paid off every month, but it’s worth noting as this is one of the major differences between charge cards and credit cards. With a credit card, you’ll have a minimum monthly payment which you can pay without any negative impacts to your credit score, but you’ll also accrue monthly interest fees. Alternatively, you can use your credit card sparingly and make sure to pay the entire bill every month in order to avoid interest fees.

With a charge card, you can’t get into any debt. Credit card debt can lead to many problems if it’s left unpaid, and grow into an overwhelming amount. This risk can lead many people to avoid using credit cards, or to choose a charge card.

You might notice some charge card issuers, like American Express, offer the ability to use your charge card as a credit card for select purchases. This allows the card holder to pay for an item or a trip over time, instead of at the end of the month. However, this means you’ll get interest fees on the amount owed.


Noted above, we mentioned that charge cards usually do not charge interest fees, unlike credit cards. But that doesn’t mean they don’t make up for it in other fees. Much like credit cards, you will have to pay a late fee if your payment is late on your charge card.

Generally, most charge cards also have annual fees which can be at least $95. Some card issuers will offer sign-on perks like the annual fee waived, but that’s usually only for the first year.

Card Issuers

Charge cards are primarily issued through American Express. When considering whether or not you will choose a charge card vs. a credit card, it’s worth noting that American Express is not as widely accepted as Mastercard and Visa.

Credit cards offer a lot more flexibility and are generally issued by Mastercard or Visa. This are usually accepted anywhere that can take cart payments. Perks and rewards have also become so competitive that many card issuers offer the same systems.

Credit Score

When used responsibly, both charge cards and credit cards can help improve your credit score. However, credit reports won’t factor your charge card into what they call credit utilization. It’s when your credit report reflects the amount you owe compared to the amount of credit you’ve been given. Since charge cards don’t have a spending limit, it doesn’t contribute to the card utilization portion of your report.

This could be good as it prevents you from harming your own credit history by spending too much of your credit limit. But it could also be viewed negatively as credit utilization can help bring up your score, when credit is used responsibly.

Charge Disputes

Disputing a charge on your card is essentially the same whether you’re using a charge card or a credit card. Fortunately, your liability is limited thanks to the Fair Credit Billing Act. But it’s important to keep a close eye on your statements and catch any unauthorized charges right away. If you notice an unauthorized charge, or if your card was lost or stolen, you should immediately report this to the police and to your card issuer.

Charge Card vs. Credit Card: Which Is Best for You?

While credit cards can be more flexible, they charge interest fees if you don’t pay the card off in full every month. Charge cards offer great rewards with no spending fee or interest fees, but you will get annual fees and large late fees if you miss a payment. Choosing between a charge card or a credit card is largely based on your budget, spending habits, and the rewards you wish to use. As long as you can pay your bill every month, you’re going to be fine with either choice.

Image Source:


Want a FREE Credit Evaluation from Credit Saint?

A $19.95 Value, FREE!

This site is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as This compensation may impact how and where links appear on this site.  This site does not include all financial companies or all available financial offers. Learn more in our Earnings Disclaimer.
Get a FREE Credit Evaluation from Credit Saint Today!