Charge Cards vs. Credit Cards – What Are the Differences?

It’s not uncommon for people to get confused between charge cards and credit cards. Both terms are often interchanged, and each card type can be used for purchases. Additionally, most cards share an almost identical look, which only furthers the confusion.

However, charge cards aren’t the same as their credit counterparts. Despite their similarities, these card types have noticeable differences that can affect the way you use them and affect your credit report as well. In this article, we’ll look at the most significant differences between credit and charge cards.

Charge Cards vs. Credit Cards: The Differences

If you have experience with credit cards, you’ve probably noticed that those come with a set spending limit, also known as the credit limit. This feature prohibits card users from spending funds past a certain point. While some issuers might allow you to go over the limit, such expenditure usually comes with an additional fee. Charge cards are different in that regard. A charge card might still be limited, but that limitation won’t be preset. Instead, it will depend on various risk factors the issuer determines, including your debts, credit, income, and payment history.

Another difference is with the way you pay the card balance. Credit cards allow you to settle a percentage of your balance total at the end of each month, revolving the rest into the following month, which usually comes with interest. With a charge card, you’ll need to pay the entire amount every month. While this might seem more rigid than the flexible credit card model, it can also be helpful in controlling your expenses.

Finally, credit cards can be more convenient for late payers. If you can’t pay the entire balance, you can avoid late payment fees by paying the minimum amount. Of course, in doing so you are now carrying a balance and incurring interest charges that can be as high as 30% per year. For this reason, credit cards are often very profitable offerings for banks and other financial institutions even smaller ones such as Hardin County Bank and Michigan State University Credit Union (MSUF).

With a charge card, however, this option will be off the table. If you don’t pay the full charge card bill on time, you might be required to pay an additional fee. Furthermore, what happens to your account if you’re late on a payment depends on the issuer. Some might immediately close your account or suspend your privileges. Two large charge card issuers are American Express and Discover.

Depending on your budget and lifestyle, you might find a charge card more convenient than a credit card. Both can have certain advantages and disadvantages, but those will be relative to the way you use the cards. If you can pay your balance fully by the month’s end with ease, you might find a charge card a better fit. On the other hand, a credit card will be ideal if you need more flexibility. In either case, now that you’ve learned the differences between the two, you’ll have an easier time making the right decision.


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