The Differences Between a Credit Card and a Charge Card

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Last updated on August 15th, 2023

Although most credit cards have the same fundamental components – a revolving line of credit through which individuals can make purchases and carry balances month-to-month at the cost of an interest charge – there is another, now-lesser-known type of credit card that functions differently. It is the charge card, and while it is a much less popular form of payment than it used to be, it is still offered by card issuers. Read on below to learn more about the difference between charge cards and credit cards.

What is a Charge Card?

A charge card is a particular type of credit card. It is like a credit card in that a person can use it as a form of payment and accumulate purchases as part of a singular balance, but it differs from a credit card in that said balance must be paid in full every month. There is no revolving credit in a charge card – which are sometimes referred to as cards with no preset spending limit – credit card issuers typically do not impose strict spending limits on them – and because each monthly balance must be fully paid, there are no charged interest rates or minimum payment due options.

The concept of a charge account has existed for over 100 years, but charge cards only began to make an appearance during the mid-20th century. Charge accounts were associated with department stores, and customers were only allowed to charge purchases to their accounts within the specific store that offered them.

In 1950 the charge card was born with the founding of a company named Diners Club. The achievement was also momentous in that said card offered the first type of charge account that could be used with multiple merchants. Over time other companies began offering their own charge cards, and the concept eventually led to the creation of the multipurpose revolving credit card, which is what most of us use today to make purchases.

Common Charge Cards

Arguably the largest issuer of charge cards remaining today is American Express. Their popular Platinum Card and Gold Card are established names in the industry and commonly associated with high status and purchasing power. Since charge cards require that customers pay their account balance in full each month – lest they face penalty fees and restrictions – applicants usually must have above-average credit scores in order to be approved for one.

Another well-known issuer of charge cards is the company that started it all: Diners Club. Though smaller in scope than American Express, Diners Club issues consumer and corporate charge cards that can be used around the world. Other examples of charge cards include the Amex Centurion Card (the vaunted Black Card), the Capital One® Spark® Cash Plus for Business, and the BILL Divvy Corporate Card.

Advantages of Using a Charge Card Over a Credit Card

One of the biggest benefits of owning a charge card is the fact that they often lack a preset spending limit. Since charge card issuers require that you pay back the full amount that you owe by the due date, the assumption is that no matter how much you spend, you will pay it back. Hence, no credit limit.

Failure to do so results in costly penalty fees and eventually cancellation of your account. As such, charge cards are commonly owned by individuals with disciplined financial habits and above-average wealth.

This leads to the next advantage of opting for a charge card: It keeps you responsible with your finances. Whereas a credit card allows you to be “looser” with your spending, a charge card forces you to purchase what you can afford to pay back within the required time period. Because of this caveat, charge cardholders also usually have higher credit scores than most credit cardholders.

Charge cards also come with ample perks. American Express’s charge cards, for instance, allow customers to earn rewards and also offer them features such as concierge service, travel credits, and access to exclusive airport lounges.

Advantages of Using a Credit Card Over a Charge Card

Charge cards offer some benefits vs. credit cards, but suffer in other areas. They are less popular and less abundant than they used to be, and that’s because credit cards offer much more flexibility across multiple factors. There are several types of credit cards that target more focused consumer groups, such as students, business owners, travelers, or retail store loyalists. Charge cards, on the other hand, are for general-purpose use, skewing slightly towards travel enthusiasts.

Credit cards also offer more options when it comes to the benefits of owning one. Depending on the credit card, consumers can earn rewards points or miles with a singular or multiple airlines or hotel brands, cash back, discounts at specific retail merchants, or exclusive access to events and experiences.

Credit cards are much better for building credit versus a charge card. Because credit cards feature revolving credit, meaning the card doesn’t require the entire balance be paid each month, building a positive credit score with a credit card is much easier.

Charge cards, on the other hand, can actively hurt a person’s credit file (when not sued correctly). Running-up a huge balance on a charge card can dramatically sink your credit score. This is because the credit bureaus will note the balance on the charge card, but not the credit limit (as there is none, per se). This quirk means a charge card can significantly increase your credit utilization – even if you aren’t using your credit cards.

Then there’s accessibility. It’s easier to apply and get approved for a credit card simply because there are so many of them. Plus, there are credit cards that cater to consumers from anywhere in the credit score spectrum; charge cards are typically aimed at individuals with higher credit standings.

And charge cards are less widely accepted worldwide. Even the industry giant that is American Express is not accepted as widely internationally as credit card payment networks like Mastercard and Visa. Finally, many charge cards feature an annual fee, with the very best options featuring fees rising as high as $695 per year.

Bottom Line

Credit cards and charge cards are closely related, but they have clear distinctions. Should you apply for a charge card? There are certainly enticing advantages to owning one, but you must be the right kind of consumer for it.

You should take the time to identify your spending habits – what you purchase, how often, and how readily you can pay back what you owe – as well as the health of your credit before making a decision, as such factors will dictate how well you can manage the type of plastic in your wallet. Be sure to also read fully through a card’s terms and conditions – be it credit or charge – as there may be differences in the obligations and fees associated with each card.

Related Article: What Are the Easiest Credit Cards for Bad Credit to Get?

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About: Allan Guzman Chinchilla
Allan Guzman Chinchilla

Allan is the Managing Editor at In addition to leading a robust team of writers in the pursuit of thorough credit cards expertise, he is an avid fan of films, food, traveling, and Star Wars.

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