Charge Cards Are Not Credit Cards – Understanding the Difference

People often assume a charge card is just another way to say credit card but that is not the case. A charge card is a completely different entity than a credit card.  If you have never used a charge card, you should know what sets them apart from the regular plastic credit cards you may already have in your wallets.

What Is a Charge Card?

A charge card is typically issued by one company these days, American Express (e.g. Amex’ Zync, Green, Gold, and Platinum cards).  These types of cards require that the owner pay off the total balance each month.  With these cards, there are no interest rate charges and no set spending limits (though you can be cut off, more on that below).  This type of card may be ideal in light of the many changes in the credit card industry and the stringent rules of major credit card providers.  Despite the seemingly lax rules of charge cards, they may still not be the best option for all consumers.

How Charge Cards Work


Qualifying for a charge card is similar to the approval criteria for other major credit cards in that consumers must have excellent credit backgrounds.  American Express does not publicly list the other criteria for getting approved for a charge card.


There are annual fees for the charge card that are incurred.  These fees range from $25 to $450 a year and encompass membership benefits like rewards programs and other incentives based on spending.  Late fees are also assessed on outstanding balances if payments are paid late.  These fees range from $35 flat-fees to a 2.99% of the total balance due – whichever amount is larger.  Foreign transaction fees are also assessed when the charge card is used outside of the US.

Grace Periods

Customers typically have 40-50 days from the end of the billing cycle to pay the balance, compared to the 20-30 days you have with a credit card.  There are also flexible payment options available that allow you to carry a charge card balance for travel purchases made over $200.  With the payment plan, you are required to make minimum payments on a monthly basis and interest charges are incurred on the account.

Cash Advances

Unlike most major credit cards, charge cards do not allow an option for taking cash advances.

Credit Limits

American Express will monitor a consumer’s credit report and purchasing tendencies to assess spending limits.  You will not be privy to the spending limit you have but if you plan to make a big-ticket purchase, you can check in with the company directly.  There are no over-the-limit fees assessed but if you go over the cap on spending limits, your card can be declined.  Automated alerts can be set up to provide notifications of balance levels.  For any additional cards attached to the account, consumers can set spending limits.

Credit Effect

Charge cards do work like major credit cards in that you can use it to establish and boost a credit history.  However, part of your credit score encompasses the outstanding balances you maintain against the available credit limits you have.  A charge card can provide a distorted view of how you use credit and can potentially lower your score (or maintain, depending on how charge account balances are factored in) if your charge card balances are too high.

Some, who would rather use a debit card than a credit card, may prefer charge cards as the account is factored into your credit score (a debit card is not) and you have to pay off your balance monthly (for some, carrying a balance on a credit card is too tempting).

Another aspect affecting credit scores is that the biggest factor in your scores is paying on time.  Since charge cards require you to pay in full every month they provide a great history of timely payments.

There are several key differences between a charge card and a conventional credit card that can be advantageous to some users. Understanding the differences and advantages of both can help you select the best financial resources for your personal financial needs.

Do you use a charge card?  How do you like it compared with a credit card?

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Published or updated April 13, 2013.


  1. Charge cards, credit cards and debit cards are three very different beasts. The main benefit of a charge card is having no carry-over balance each month drawing ever-increasing amounts of interest from your budget. The main drawback of charge cards is the main benefit – having to pay off even the largest balance at the end of the month.

  2. Is there a big difference between a charge card and a debit card?

  3. I just got my first charge card and I am loving it. Every week I just pay off my balance from my debit card while I get the protection from Amex and the points associated with the purchase.

    I had no idea about the limit aspect of it. I wonder if I can get that information without the actual purchase?

    • You could call Amex and ask them about your limit.

      I wonder if you get rewards points off a debit card for paying a credit card? Could be an awesome way to maximize rewards from something like a PerkStreet or ING Electric Orange.

  4. says:

    I know Citi has an AA Advantage debit card, but it has a yearly fee. Everytime you use it you get AA points, just like with the Citi AA Platinum Credit Card. I thought about it, but the fee was high for a debit card, plus the savings account had monthly fees if you didn’t have direct deposit.

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