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Charge Card vs Credit Card: Which Is Right for You?

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In the realm of electronic payments, two prominent players vie for consumer attention: charge cards vs credit cards. Each offers distinct advantages and features, and choosing between them is a matter of careful consideration.

In this article, we will delve into the key differences between credit cards and charge cards, helping you make an informed decision about which card suits your financial needs and spending habits.

What is a charge card?

Charge cards resemble credit cards in their purchase usage and share several features, such as rewards and perks. However, charge cards usually lack a predetermined credit limit, unlike credit cards.

Transaction approvals depend on factors like spending habits and credit history. At the close of each month, charge card users must settle the entire balance, eliminating the need for minimum payments and a credit card’s interest structure.

However, failing to pay the balance in full can result in additional fees or penalties.

What is a credit card?

Credit cards represent a form of revolving credit, enabling cardholders to borrow and repay funds continuously while maintaining an active account.

They come with predetermined credit limits, signifying the maximum allowable expenditure for cardholders. Monthly payments are a customary requirement.

While full payment of the card’s balance each month is not obligatory, a minimum monthly payment is typically mandatory. Failing to clear the balance in full may result in the addition of interest charges.

📚Read more: What Is a Charge Card?

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The main differences between charge and credit card

There are a few aspects that set charge cards and credit cards apart. These key differences may help you decide which card is more suitable for your needs.

Preset spending limit

In terms of the preset spending limit, charge cards often provide higher or even no preset limits, which can prove advantageous for substantial purchases.

Spending limit prevents the risk of negatively affecting your credit score when you approach your credit limit.

It’s important to note that no preset spending limit doesn’t imply unlimited spending. Instead, the limit varies based on factors like card usage, payment history, creditworthiness, financial capacity, and other relevant considerations.

Cardholders can readily check their preset credit limit through online platforms, mobile apps, or by contacting the number on the back of the card.

In contrast, credit cards come with a fixed limit that changes infrequently. Should you max out your available credit limit, your card may be declined. While some credit card issuers do offer the option to spend beyond your limit, this often incurs over-limit fees.

Debt and interest

Traditional charge cards require you to pay the balance in full each month, preventing the accumulation of significant debts and eliminating interest charges, which can be seen as a built-in discipline.

Moreover, if you use a charge card, any outstanding balance must be settled in full when the monthly statement arrives.

In contrast, a typical credit card allows you to carry a balance over time. However, in this case, you typically have to pay interest too.

Annual fee

Charge cards and credit cards may have an annual fee. However, charge cards carry high annual fees ranging from $150 to $550. These fees are linked to the rewards and perks provided by charge cards. 

Late payment fees

Charge cards demand full balance settlement to prevent late fees. Carrying a balance may result in significant late fees or other penalties, possibly leading to account suspension, closure, or adverse credit score impacts.

Charge card and credit card issuers can report late payments to credit reference agencies, and too many late fees can harm your credit history.

However, some credit cards may also not impose late payment fees. It always depends on your credit card issuer.

Nonetheless, you can avoid late payment fees by making the minimum payment with a maximum fee of $30 for the first occurrence and $41 for subsequent late payments.

📚Related: How to Remove Late Payments from a Credit Report?


Charge cards often feature generous spending rewards and built-in perks, particularly for travel. Depending on the specific charge card, rewards can be provided in various forms, such as cashback, rewards points, or travel miles.

However, in terms of rewards and benefits, intense competition in the credit card market has led to some credit cards matching or surpassing charge cards.

A payment card

Charge card vs credit card: effect on payment history and credit record

Charge cards and credit cards may help you build a better credit score. However, you can do it in different ways.


When you apply for a charge or credit card, the issuer will most likely check your credit history. It will lead to a thorough investigation. Hard inquiries can stay on your credit reports for up to two years.

Credit utilization

Credit utilization measures how much of your available credit you use at any time. Usually, credit cards have a firm spending limit.

The credit utilization is calculated by comparing your statement balance to your credit limit. For example, a 10 € statement balance against a 100 € limit results in a 10% utilization rate, which can influence your credit score.

However, if you want to boost your credit scores, it is advisable to maintain a credit utilization ratio of less than 30%.

In contrast, charge cards, without preset spending limits, pose a challenge for determining utilization rates. Moreover, modern credit scoring models do not factor charge cards into the overall utilization rate.

This feature offers an advantage because charge card spending doesn’t impact your credit utilization, unlike credit cards where approaching the limit can adversely affect your credit scores. Older scoring models may differ in their treatment of charge cards in this context.

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Making payments

Credit cards require a minimum payment at the end of each billing cycle and offer the option to carry a balance from one month to the next. In contrast, charge cards mandate full payment by the end of each month.

Ensuring on-time payments for both charge cards and credit cards is essential for establishing a strong credit profile.

If you are late to make a payment for more than 30 days,  it is reported to credit bureaus and can affect credit scores, access to credit, and the interest rates associated with your credit lines for up to seven years.


Is a charge card the same as a credit card?

Credit cards and charge cards may look identical. However, they have different financial tools. Even though you can use them both to buy without cash, pay-off methods, incur interest charges, and other fees, and their application differ.

Charge card vs credit card – which is better?

There isn’t one answer to whether a charge or credit card is better. It depends entirely on your needs and requirements. If you want more freedom and flexibility, choose a charge card.

However, if you value the ability to carry a balance and make smaller monthly payments, a credit card may be the better option.

What is the disadvantage of a charge card?

Many charge cards carry high annual fees, while there are many fee-free credit and debit cards available. Also, there are often fewer charge card options than credit card options because of the small number of issuers offering charge cards.

Why would anyone use a charge card?

In contrast to any credit card, charge cards do not have a preset spending limit. It makes charge cards more flexible because it provides access to the purchasing power you require, even if that amount varies greatly from month to month. However, this does not imply that you have unlimited spending power.

How can I get a charge card?

Financial institutions, such as banks, issue charge cards. Although most charge cards require a credit score of around 670 to be authorized, some issuers specialize in charge cards for those with credit scores below 670.

Živilė Šarkauskaitė

Živilė is a writer with a diverse background, having worked with tech start-ups and pioneering brands across various industries. Her profound interest in progress and innovation drives her to the field of Fintech, a realm that sparks her curiosity and inspires her to share insights with others.

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Please be advised that the information presented in this article is intended for general informational purposes only. It should not be construed as professional advice from swissmoney. It is important to note that swissmoney does not act as a financial adviser, and individuals are strongly encouraged to seek independent advice from qualified legal, financial, or accounting professionals before making any decisions related to cryptocurrency investments. Furthermore, investing in cryptocurrency assets carries inherent risks, and individuals should be aware that they may potentially lose all of their invested capital.

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