Updated on 12.01.16

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

Trent Hamm

Most people think that the terms “charge card” and “credit card” are interchangeable. However, that’s not actually the case. In the real world, charge cards and credit cards have both similarities and differences. Keep reading to learn more about charge cards and credit cards, how they work, and the advantages and disadvantages of each.

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

While you swipe a charge card to make payment just like you would with traditional credit or debit card, what happens next is much different. By and large, a charge card works like a short-term loan (usually a one-month loan) for a purchase. The card issuer agrees to make you these loans at your discretion, but you’re expected to repay your balance in full when your statement closes. Because charge cards don’t expect you to carry a balance from month to month, you aren’t charged a standard interest rate – nor do you have a minimum monthly payment. Instead, most charge cards come with a hefty annual fee for their use. If you cannot pay your balance in full, charge cards will charge fees and interest until your loan is repaid, and they may even shut down your card.

Credit cards, on the other hand, do not have to be paid off in full at the end of each month. These cards can carry a balance forward, but the credit card issuer charges you interest on that forward balance. Also, there are no late fees if you pay the minimum payment each month. Since the card issuer charges interest when you carry a balance from month-to-month, they will let you make minimum payments on your debts for years. While some credit cards don’t charge an annual fee, other cards – and especially those with lucrative rewards programs – charge annual fees between $49 and $450.

Figuring Out Which One Is Right for You

Since charge cards weren’t created for individuals who want to carry a balance, they are mostly geared to people who are more financially stable. Charge cards are also popular among travel enthusiasts since they tend to offer a lot of travel-oriented consumer protections and rewards. Charge cards might also be a better option for people who want the benefits of credit cards without the possibility of getting into debt. Since charge cards ask you to pay your balance in full every month, it’s much harder to run up a balance that will haunt you for a lifetime.

Credit cards offer more flexibility in terms of repayment, but they also make it easier to get into trouble. With a line of credit to abuse, many people spend far more than they can afford to repay and rack up credit card debt in the process. Credit cards do have lots of consumer protections along with valuable rewards, and those benefits tend to draw consumers in time and time again. There’s nothing wrong with using a credit card as long as you are able to avoid overspending.

Credit Cards are Best For:

  • Consumers who want the option to carry a balance from month to month
  • People who want to make a large purchase and pay it off over time
  • People who have restraint when it comes to their spending
  • Charge Cards are Best For:

  • People who don’t want the option to carry a balance
  • Individuals who have plenty of cash to pay their bills in full every month
  • Consumers who travel and want travel-related consumer protections and rewards
  • So, credit card or charge card? Which one should you choose?

    As a general rule, you shouldn’t use a credit card or a charge card unless you’re financially stable and able to keep the balance under control. Either type of card can wreak havoc on your budget if you don’t keep track of your spending, so it’s up to you to protect yourself and know your own limits.

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    1. Golbguru says:

      I am glad you pointed out this difference. I have dropped the word “charge cards” a couple of times in my friends circle and got a “huh!?” look on their faces :)

    2. deRuiter says:

      Credit cards, for the financially responsible, are a great institution. I’m a frequent flyer miles junkie, and take wonderful trips funded by the free miles. The secret to credit cards is to use them to buy ONLY what you would pay for in cash each month. Twice a month, on the 1st and the 15th, pay your credit card balances online. Choose airline credit cards, where the first year is free and they give you a bonuse of 15,000 to 25,000 miles. Come the 11th month, when the company wants to charge $60.-$95. for the second year, call customer service to see if the charge can be negated. If so, keep the card. If not, apply for another airline’s credit card for a year free, get the miles, and close the first one before the fee has to be paid. There are TONS of other strategies for getting miles free for doing everyday things which one would do anyway. Those free miles are there and the price of them is built into the price of services and goods for which you pay. Think of that free trip to India for $95. (you pay only the government’s taxes on the flight), the $50. trip to Europe, that $115. trip to New Zealand! Without my airline credit cards, I’d have to pay full fare, or not travel. A PERSON WITH GOOD SELF DISCIPLINE CAN USE CREDIT CARDS SAFELY, AND PROFIT FROM THEM. You have to be vigilant about the use of the credit cards. If gasoline is 5 cents a gallon cheaper for paying cash, ALWAYS pay cash, as the nickel is more valuable than the miles. If you have automatic bill pay, pay out of your credit card, not your checking account. For every dollar you have to pay anyway, you will get a free mile. Withdrawing the monthly bill money from the checking or savings account does not net you any bonus. Credit is a tool. Use it wisely and it is a grand servant. Use it foolishly and it is a harsh master.

    3. If hydrocarbon is 5 cents a gallon cheaper for remunerative cash, E’er pay payment, as the nickel is writer worthy than the miles. If you hit automatic program pay, pay out of your assign record, not your checking chronicle. For every symbol you mortal to pay anyway, you module get a available mile. Withdrawing the monthly saw money from the checking or fund record does not net you any bonus.
      lucy

    4. Ada says:

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      website. Keep up the good writing.

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