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Monday, April 19, 2021

3 Key Differences — Charge Card vs. Credit Card

Charge Card Vs Credit Card

credit card advice

Eric Bank
By: Eric Bank
Updated: November 15, 2019
Advertiser Disclosure

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 and characteristics of a charge card vs. credit card, 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 4X points per dollar at US restaurants and grocery stores, 3X points on travel booked through amextravel.com, and 1X points on other purchases
  • Receive $100 Airline Fee Credit and up to $120 a calendar year toward select dining purchases

The annual fee is $250 each 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

★★★★★
4.9

OVERALL RATING

4.9/5.0
  • INTRO OFFER: Unlimited Cashback Match – only from Discover. Discover will automatically match all the cash back you’ve earned at the end of your first year! There’s no minimum spending or maximum rewards. You could turn $150 cash back into $300.
  • Earn 5% cash back on everyday purchases at different places each quarter like Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate.
  • Plus, earn unlimited 1% cash back on all other purchases - automatically.
  • Redeem cash back in any amount, any time. Rewards never expire.
  • Use your rewards at Amazon.com checkout.
  • #1 Most Trusted Credit Card according to Investor’s Business Daily.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% for 14 months
0% for 14 months
11.99% - 22.99% Variable APR
$0
Good/Excellent

EXCELLENT CREDIT RATING

★★★★★
4.8

OVERALL RATING

4.8/5.0
  • Earn 100,000 bonus miles when you spend $20,000 on purchases in the first 12 months from account opening, or still earn 50,000 miles if you spend $3,000 on purchases in the first 3 months
  • Earn unlimited 2X miles on every purchase, every day
  • Miles won't expire for the life of the account and there's no limit to how many you can earn
  • Receive up to $100 application fee credit for Global Entry or TSA Pre✔®
  • Redeem on travel—from vacation rentals to car rentals and more. Plus transfer your miles to over 10+ travel loyalty programs
  • No foreign transaction fees
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
N/A
N/A
17.24% - 24.49% (Variable)
$95
Excellent, Good

EXCELLENT CREDIT RATING

★★★★★
4.8

OVERALL RATING

4.8/5.0
  • Earn a $200 Bonus after you spend $500 on purchases in your first 3 months from account opening.
  • Earn unlimited 1.5% cash back on all other purchases.
  • Earn 5% on travel purchased through Chase, 3% on dining at restaurants and drugstores, and 1.5% on all other purchases.
  • No annual fee.
  • 0% Intro APR for 15 months from account opening on purchases, then a variable APR of 14.99 - 23.74%.
  • No minimum to redeem for cash back. Cash Back rewards do not expire as long as your account is open.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR on Purchases 15 months
N/A
14.99% - 23.74% Variable
$0
Good/Excellent
Chase Freedom Flex℠ Review

at the issuer'ssecure website

EXCELLENT CREDIT RATING

★★★★★
4.8

OVERALL RATING

4.8/5.0
  • Earn a $200 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!
  • Earn 5% on travel purchased through Chase, 3% on dining at restaurants and drugstores, and 1% on all other purchases.
  • No annual fee.
  • 0% Intro APR for 15 months from account opening on purchases, then a variable APR of 14.99 - 23.74%.
  • No minimum to redeem for cash back. Cash Back rewards do not expire as long as your account is open.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR on Purchases 15 months
N/A
14.99% - 23.74% Variable
$0
Good/Excellent
Discover it® Miles Review

at Discover Card'ssecure website

EXCELLENT CREDIT RATING

★★★★★
4.8

OVERALL RATING

4.8/5.0
  • UNLIMITED BONUS: Only Discover will automatically match all the Miles you’ve earned at the end of your first year. For example, if you earn 35,000 Miles, you get 70,000 Miles.  There’s no signing up, no minimum spending or maximum rewards. Just a Miles-for-Miles match.
  • Automatically earn unlimited 1.5x Miles on every dollar of every purchase - with no annual fee.
  • New! Redeem Miles to pay any part of your monthly bill, including your minimum payment.
  • Turn Miles into cash in any amount, any time. Or redeem as a statement credit for travel purchases like airfare, hotels, rideshares, gas stations, restaurants and more with no blackout dates. However you redeem, Miles keep the same value. And Miles never expire.
  • No Blackout Dates. Simply pay for travel purchases like airlines, hotels, rental cars, and more with your Discover it® Miles card.
  • Discover is accepted nationwide by 99% of the places that take credit cards.
Intro (Purchases)
Intro (Transfers)
Regular APR
Annual Fee
Credit Needed
0% Intro APR for 14 months
10.99% Intro APR for 14 months
11.99% - 22.99% Variable APR
$0
Good/Excellent

+ 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.

Although they are not as popular among consumers as they once were, they certainly still have their place in the finance world. You just have to decide if they are a good fit for your situation and needs.

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