3 Key Differences — Charge Card vs. Credit Card

3 Key Differences — Charge Card vs. Credit Card

credit card advice

Eric Bank
By: Eric Bank
Posted: May 24, 2018
Opinions expressed here are ours alone, and are not provided, endorsed, or approved by any issuer. Site may be compensated through the issuer affiliate programs.

It’s easy to think that “charge card” is just another way to say “credit card,” but the two actually have very different meanings. Charge cards were once widely used, but the market for them has been largely conceded to American Express (Amex). Nowadays, consumers mainly turn to credit cards for their spending needs, as the rewards and perks can be very similar.

In this article, we’ll discuss the major differences between credit and charge cards, and take a close look at three popular cards offered by Amex, as well as some of the top alternatives available with comparable benefits.

Differences (3) | Top Charge Cards (3) | Top Alternatives (10)

1. Charge Cards Don’t Have Pre-Set Spending Limits

Charge cards do have spending limits, it’s just that they aren’t pre-set. In other words, they can easily change over time and to accommodate special requests. You can contact the charge card company at any time (online, by phone, or via a mobile app) to check your current spending limit and to ask for a higher one. That limit is based on your financial resources and history — obviously, if you’ve missed payments in the past, it will count against you.

Credit cards come with less flexible spending limits. They can be increased over time, but not nearly as frequently as for charge cards, and the credit card companies will want to see some improvement in your credit score before it grants a significant increase. Timely payments will help in that regard.

2. You’re Required to Pay the Balance in Full Each Month

Unlike credit cards, charge cards require that you pay the full balance each month. That’s why there is no interest rate associated with a charge card, but there are stiff late fees if you don’t pay your balance on time. For Amex cards, the first late month costs $27, which grows to $38 on the second occurrence within the next six months. Two consecutive late payments will cost you the greater of $38 or 2.99% of the balance. Amex has a hybrid program called Pay Over Time that allows you to spread out the repayment of certain approved purchases, at a set financing rate.

Credit cards also charge late fees (on top of interest), and these fees may be higher than Amex’s. You avoid late fees (but not additional interest) as long as you make the minimum payment each month to the credit card company. Late credit card payments hurt your credit score, and late charge card payments may do so too – that is, if the card company reports it to the credit bureaus.

3. They Typically Have Hefty Annual Fees & Top-Notch Perks

American Express charges annual fees as high as $550. In return, you get generous rewards and money-saving perks, especially for travel-related activities. However, many credit cards now offer perks, and a few of them provide benefits as good or better than those offered by American Express — for example, see our review of the Chase Sapphire Preferred Credit Card.

Many credit cards don’t charge an annual fee, but don’t expect top rewards from them.

Top 3 American Express Charge Cards

American Express remains the only giant charge card issuer in the U.S. Diners Club runs a distant second. American Express also offers credit cards and travelers’ checks. Here are the three popular Amex charge cards:

1. The Platinum Card® from American Express

Although saddled with a $550 annual fee, The Platinum Card® from American Express is highly regarded for its generous rewards and benefits. The card charges no foreign transaction fees, and offers these benefits:

The Platinum Card® from American Express

  • You receive 5X points when you use the card to book flights with American Express travel or directly from the airlines
  • Receive a $200 Airline Fee Credit and up to $200 per calendar year in baggage fees annually, plus worldwide access to the Global Lounge Collection

There are no interest charges on purchases, but late fees are assessed if you don’t repay your monthly balance in full. The main drawback is the steep annual fee. You may want to evaluate our best credit card alternatives (see below) that charge less.

2. Premier Rewards Gold Card from American Express

The Premier Rewards Gold Card from American Express cost less to own, but its rewards are less generous than those from the Platinum card. Still, the rewards are fairly liberal, especially if you travel a lot.

Premier Rewards Gold Card from American Express

  • Receive 3X points when used to book flights with American Express travel or directly from the airlines, 2X points on gas, groceries, and at restaurants, and 1X points on other purchases
  • Receive $100 Airline Fee Credit and up to $100 a calendar year for baggage fees at one airline

The annual fee of $195 is waived for the first year. You do not get access to the Global Lounge Collection, but there are no foreign transaction fees.

3. Amex Business Platinum Card

If your job requires frequent travel, the American Express Business Platinum Card might be perfect for you. The $450 annual fee lets you earn hefty rewards, and the signup bonus is generous, allowing for an additional 25,000 bonus points — 75,000 total — if you spend another $10,000 in the same 3-month period.

American Express Business Platinum

  • Receive 2X points when used to book flights with American Express travel or directly from the airlines, 1.5X points for qualifying purchases of $5,000 or more, and 1X points on everything else
  • Receive a $200 airline fee credit for incidental fees annually

The card rebates certain fees for TSA Precheck and Global Entry, allows access to the Global Lounge Collection, and provides a 50% additional airline bonus for first-class and business-class flights booked with the card. Drawbacks include the high annual fee and the fact that Amex cards are accepted at fewer places than are Visa and MasterCard credit cards.

5 Charge Card Alternatives

If you’d prefer to be able to carry a balance and avoid the high annual fees assessed by many charge cards, check out our list of popular credit cards below. You’ll find cards with low or no fees, as well as cards with generous rewards, signup bonuses, and plenty of other benefits.

Discover it® Cash Back Review

at Discover Card'ssecure website

EXCELLENT CREDIT RATING

★★★★★
5.0

OVERALL RATING

5.0/5.0
  • Earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, Amazon.com, or wholesale clubs up to the quarterly maximum each time you activate.
  • Plus, earn unlimited 1% cash back on all other purchases - automatically.
  • INTRO OFFER: Discover will match ALL the cash back you've earned at the end of your first year, automatically. There's no signing up. And no limit to how much is matched.
  • Redeem cash back any amount, any time. Rewards never expire.
  • Use your rewards at Amazon.com checkout.
  • Receive FREE Social Security number alerts-Discover will monitor thousands of risky websites when you sign up.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% for 14 months
0% for 14 months
13.74% - 24.74% Variable
$0
Good/Excellent

EXCELLENT CREDIT RATING

★★★★★
5.0

OVERALL RATING

5.0/5.0
  • 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 16.74-25.49%. Balance transfer fee is 5% of the amount transferred, $5 minimum
  • Unlimited 1.5% cash back on every purchase - it's automatic
  • Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening
  • No minimum to redeem for cash back
  • Cash Back rewards do not expire as long as your account is open
  • Free credit score, updated weekly with Credit Journey℠
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR on Purchases for 15 months
0% Intro APR on Balance Transfers for 15 months
16.74% - 25.49% Variable
$0
Excellent/Good

EXCELLENT CREDIT RATING

★★★★★
5.0

OVERALL RATING

5.0/5.0
  • 0% Intro APR for 15 months from account opening on purchases and balance transfers, then a variable APR of 16.74-25.49%. Balance transfer fee is 5% of the amount transferred, $5 minimum
  • Earn a $150 Bonus after you spend $500 on purchases in your first 3 months from account opening
  • Earn 5% cash back on up to $1,500 in combined purchases in bonus categories each quarter you activate
  • Enjoy new 5% categories each quarter
  • Unlimited 1% cash back on all other purchases - it's automatic
  • Cash Back rewards do not expire as long as your account is open and there is no minimum to redeem for cash back.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR on Purchases for 15 months
0% Intro APR on Balance Transfers for 15 months
16.74% - 25.49% Variable
$0
Excellent/Good

EXCELLENT CREDIT RATING

★★★★★
5.0

OVERALL RATING

4.9/5.0
  • Enjoy a one-time bonus of 50,000 miles once you spend $3,000 on purchases within 3 months from account opening, equal to $500 in travel
  • Earn 2X miles on every purchase, every day. Plus earn 10X miles on thousands of hotels; learn more at hotels.com/venture
  • Named ‘The Best Travel Card' by CNBC, 2018
  • Receive up to $100 application fee credit for Global Entry or TSA Pre✔®
  • Fly any airline, stay at any hotel, anytime; no blackout dates
  • Miles won't expire for the life of the account and there's no limit to how many you can earn
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
14.74% - 24.74% (Variable)
$0 intro for first year; $95 after that
Excellent, Good
Wells Fargo Cash Wise Visa® Card Review

at Wells Fargo'ssecure website

EXCELLENT CREDIT RATING

★★★★★
4.9

OVERALL RATING

4.9/5.0
  • Earn a $200 cash rewards bonus after spending $1,000 in the first 3 months
  • Earn unlimited 1.5% cash rewards on purchases
  • Enjoy 1.8% cash rewards on qualified mobile wallet purchases, like Apple Pay® or Android Pay™, during the first 12 months from account opening
  • No category restrictions or sign ups and cash rewards don't expire as long as your account remains open
  • Get up to $600 protection on your cell phone (subject to $25 deductible) against covered damage or theft when you pay your monthly cellular telephone bill with your Wells Fargo Cash Wise Visa® Card
  • 0% Intro APR for 12 months on purchases and balance transfers, then a 14.74%-26.74% variable APR; balance transfer fees apply
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% for 12 months
0% for 12 months
14.74%-26.74% (Variable)
$0
Excellent/Good

+ See More Top Offers

Are You a Good Charge Card Candidate?

A charge card is not likely to be a good fit for you if you like spreading out your payments over several months, or if you don’t want to pay annual fees.  However, if you travel a lot, want top rewards and have the budget for annual fees and full payments each month, a charge card may very well fit the bill.