American Express

American Express

February 28, 2011 12:06 ET

How Do Charge Cards Differ From Credit Cards

LONDON, UNITED KINGDOM--(Marketwire - Feb. 28, 2011) - There is often much confusion between the credit card and its lesser known 'cousin' the charge card with many people using the terms interchangeably. But while they are both used as a line of finance to fund purchases or access to cash, they are in fact quite different.

The first and main difference is in the way in which customers pay back the money they spend on the card. A credit card for instance allows you to make purchases on credit and allows you to 'revolve' your credit balance, i.e. pay less than the full amount each month and have the remainder carry over to the following month. A charge card, on the other hand, requires you to pay off the full balance every month.

As such, credit cards can be a useful source of finance if you need to buy on credit and can afford to repay the balance and interest on a monthly basis. Alternatively, if you are someone who would be able to pay off the full balance of your debt each month, there are a number of benefits to taking out a charge card instead.

This is because, depending on the card you purchase, charge cards offer a number of discounts, rewards and benefits which customers tend to find appealing. Charge cards are also particularly useful if you travel regularly, as they generally have additional benefits for travelers such as rewards points which are earned by using the cards and can then be redeemed for travel vouchers, flights, and upgrades.

Furthermore, unlike with credit cards, charge card holders pay no interest on purchases. This is because the balance is settled each month – it is also for this reason that people looking to build their credit rating may find a charge card might be a better choice to make when applying for a card.

Another difference between the two cards is that unlike credit cards, a charge card does not have a preset spending limit. For unlimited preset spending limit, the provider of the card normally needs to be satisfied that you will be able to meet your monthly repayments, however no credit limit means that you are not restricted by the items you can purchase with your card, which means more opportunities for earning rewards points.

Whether you prefer the charge card or the credit card will depend on your individual circumstances and you should take time some time to research and determine which aspects of each card is the best fit for you. But remember, which ever card you use, be sure to use the cards responsibly.

Contact Information

  • American Express
    Jacquie Goozee