Financial News

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

23 December 2024

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While charge cards and credit cards share a similar appearance and function, they operate differently. Both let you buy now and pay later, but their repayment terms can vary considerably.

Charge cards are less common than credit cards. CNBC Select reviews the key differences to help you decide which is right for you.

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Are credit cards and charge cards the same?

Although charge cards and credit cards may be used interchangeably, they are not the same. Credit cards allow you to carry a balance from one billing cycle to the next, while charge cards typically need to be paid in full each month. Because of how charge cards function, things like interest rates, credit limits and approvals may differ from traditional credit cards.

Key differences between charge cards and credit cards

Charge cards and credit cards are both great ways to pay for your day-to-day needs, but it’s important to know how they differ so you aren’t caught off guard.

Charge card vs. credit card

	Charge card	Credit card
Interest rate	Often no interest rates as you can’t carry a balance	Fixed or variable APRs
Credit limit	No preset spending limit	Fixed maximum credit limit
Payments	Usually must be paid in full each month	Can carry a balance from month to month, but will generate interest
Recommended credit score	May require above-average credit scores	Available for all credit ranges
Annual fee	Usually, but will vary by card	Varies by card
Rewards	Varies by card	Varies by card

Interest rates

Charge cards generally don’t allow you to carry a balance, so they don’t have interest rates associated with them. However, some charge cards may offer an optional pay-over-time feature that acts similarly to carrying a balance, which would come with interest.

Meanwhile, credit cards have interest rates because you can carry a balance. Interest rates can vary significantly by credit card and cardholder since your credit history is a factor.

As of December 2024, the average credit card APR is 21.76% according to the Federal Reserve. And because credit card issuers usually compound interest daily, your balance grows a little each day it goes unpaid. However, there are a number of credit cards with an introductory 0% APR period, typically ranging from six to 21 months, including the following:

Wells Fargo Reflect® Card

On Wells Fargo’s secure site

Rewards
Welcome bonus
Annual fee
Intro APR

0% intro APR for 21 months from account opening on purchases and qualifying balance transfers.
Regular APR

17.49%, 23.99%, or 29.24% variable APR
Balance transfer fee
Foreign transaction fee
Credit needed

Pros

No annual fee
Long introductory APR period on purchases and qualifying balance transfers
Access to Visa Signature® Concierge
Get up to $600 cell phone protection (subject to a $25 deductible)
Access to My Wells Fargo Deals to earn cash back in the form of an account credit when shopping, dining

Cons

No rewards
No welcome bonus
3% fee charged on foreign transactions

Spotlight

Receive a 0% intro APR for 21 months on balance transfers and for 12 months on purchases.

Credit limit

Charge cards typically don’t have preset spending limits, so you may have more flexibility to make bigger purchases. But this doesn’t mean you have unlimited spending power. Instead, your purchases may be approved based on several factors including your income, repayment history and credit utilization ratio.

Credit cards have a maximum credit limit determined by your financial institution. If you attempt to spend more than your credit limit, your purchase may be denied or your card issuer may ask if you want to approve the transaction in exchange for an over-limit fee. You’ll also need to watch your credit utilization ratio with credit cards, as that makes up 30% of your FICO credit score.

Payment

Since charge cards generally don’t allow you to carry a balance, you must pay off your balance in full each month. There is no interest or minimum payment option. Any missed or late payments could result in fees and other penalties, depending on the card.

Credit cards give you the flexibility to carry your balance over time, which means you have the option to make only the minimum payment by the due date. However, the rest of your balance that you are carrying will begin to generate interest, unless you have a promotional APR offer.

Recommended credit score

Charge cards often have higher credit score requirements for approvals due to the risks of an uncapped spending limit. So you’ll want to aim for a good or excellent credit score (scores of 670 and above) to qualify for a charge card.

Credit cards, on the other hand, are much more accessible with fewer barriers to entry. There are a variety of credit cards available to many different credit profiles, including easy-to-get card options for those with bad credit or no credit at all.

Annual fee

Annual fees can vary considerably by card. There are both charge cards and credit cards with no annual fees, but charge cards often have higher annual fees. This is because charge cards have greater spending flexibility and the issuers are less likely to make money on interest charges.

Rewards and benefits

Both charge cards and credit cards can offer competitive rewards programs and other perks, but it ultimately boils down to your specific card.

Do charge cards affect your credit score?

Both charge cards and credit cards can affect your credit score.

Since charge cards don’t have a preset spending limit, they won’t affect your credit utilization rate. However, they affect other credit score factors like payment history, credit mix, amount owed and more, so it’s still important to practice good habits to build up your score.

Should I get a charge card or a credit card?

Whether you should get a charge card or credit card comes down to accessibility and personal preference. Many charge cards are geared toward businesses, so it may be harder to open a personal one.

For those looking for a card with similar features, such as no preset spending limits*, Amex has a few options including the American Express® Gold Card and The Platinum Card® from American Express. Each card has its strength with the Amex Gold’s perks focused on dining and groceries and the Amex Platinum delivering more premium travel benefits. Both cards earn American Express Membership Rewards, which are some of the most versatile rewards points on the market.

American Express® Gold Card

On the American Express secure site

Spotlight

The Amex Gold Card offers over $400 in statement credits every year.

Earn 60,000 Membership Rewards® points

The Platinum Card® from American Express

On the American Express secure site

Spotlight

The Amex Platinum Card provides access to Amex Centurion Lounges, Delta Sky Clubs, Lufthansa Lounges, Escape Lounges and more. (Enrollment required)

Earn 80,000 Membership Rewards® Points after you spend $8,000 on purchases on your new card in your first six months of Card Membership

If you prefer a more traditional credit card experience, there are a wide range of cards that could be a good fit. If you’re in the market for a rewards card, the Chase Freedom Unlimited® offers several valuable bonus categories and a generous welcome bonus — all for no annual fee.

Chase Freedom Unlimited®

Spotlight

New cardholders receive a 0% intro APR for 15 months from account opening on purchases and balance transfers.

INTRO OFFER: Earn an additional 1.5% cash back

Pro tip: You can pair this card with a Chase bank account

When you open a Chase Total Checking® account, you can earn a $300 bonus after you make at least $500 in direct deposits within 90 days of opening the account. You can also waive the monthly maintenance fee with qualifying activities.

Chase Total Checking®

Annual Percentage Yield (APY)
Minimum balance to open
Monthly service fee

$12 or $0 with one of the following, each monthly statement period: Electronic deposits made into this account totaling $500 or more, such as payments from payroll providers or government benefit providers, by using (i) the ACH network, (ii) the Real Time Payment or FedNowSM network, (iii) third party services that facilitate payments to your debit card using the Visa® or Mastercard® network, OR a balance at the beginning of each day of $1,500 or more in this account, OR an average beginning day balance of $5,000 or more in any combination of this account and linked qualifying Chase checking, savings, and other balances.
Free ATM network

With over 4,700 branches, Chase has the largest branch network in the U.S. plus access to more than 15,000 ATMs.
ATM fee reimbursement
Overdraft fee
Mobile check deposit

JPMorgan Chase Bank, N.A. Member FDIC

Pros and cons of charge cards

Pros

No preset spending limit: Charge cards don’t have a hard limit on your spending, but often adjust based on your finances and spending history.
Avoid debt and interest: Since charge cards don’t allow you to carry a balance, you won’t collect debt or pay interest.
Generates rewards: Many charge cards still have competitive rewards offerings.

Cons

Can’t carry a balance: Charge cards typically require you to pay off your balance in full each month, otherwise you face a penalty.
Higher credit score requirements: Charge cards may often have higher credit score requirements than traditional credit cards.
Larger annual fees: Charge cards can carry hefty annual fees.
Limited availability: Personal charge cards are not very common anymore, and may require some searching.

FAQs

Is a charge card the same as a credit card?

No, a charge card and a credit card are different in a number of ways, including payment schedules, credit usage and interest rates.

What are some disadvantages of a charge card?

Some drawbacks to having a charge card could be higher credit score requirements, larger annual fees, and not being able to carry a balance.

Is there a spending limit on a charge card?

Traditionally, charge cards do not have a preset spending limit, but this doesn’t mean you’re allowed unlimited spending. Spending limits on a charge card will often vary based on factors such as your spending history and income.

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*No Preset Spending Limit means the spending limit is flexible. In fact, unlike a traditional credit card with a set limit, the amount you can spend adapts based on factors such as your purchase, payment, and credit history.

For rates and fees of the American Express® Gold Card, please click here.

For rates and fees of The Platinum Card from American Express®, please click here.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.