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The Difference Between Charge Card and Credit Card

Charge Card vs. Credit Card


Charge cards and credit cards are not the same thing, though the names are sometimes interchanged. A charge card is actually a type of credit card that requires you to pay your balance in full at the end of each billing cycle instead of making payments on the balance over several months. A credit card, on the other hand, allows you to have a revolving balance that you can pay off over a period of time.

Some charge cards don’t have a preset credit limit, giving you a limitless amount of credit. Credit cards do have a credit limit and there are penalties when you go over your credit limit. For example, you’ll pay an over-the-limit fee and sometimes pay a higher interest rate for exceeding the credit limit on your revolving credit card.

You typically need to have excellent credit to get a charge card. Credit cards are available for a variety of credit histories, from bad credit to excellent credit.

Few banks issue charge cards. In fact, American Express issues most charge cards.

Charge Card vs. Credit Card Cost

You won’t pay any interest on a charge card balance because you’re not allowed to carry a balance beyond the grace period. However, you’ll face a late fee if your full balance isn’t paid by the due date, the late fee could be a flat fee or a percentage of your balance. Credit cards also have a late fee that’s charged when you don’t make your minimum payment by the due date.

Charge cards don’t have an interest rate, so that’s one factor you can take out of the equation when you’re shopping for a charge card. However, credit cards do have an interest rate. In fact, the credit card interest rate is one of the most important credit card features since the interest rate directly influences how much you pay for carrying a balance on your credit card. You can avoid paying interest on a credit card by paying the balance in full before the grace period ends.

Charge cards usually have an annual fee that could be waived in the first year. Annual fees vary depending on the card but could be as high as $500. Some credit cards also have an annual fee, but it’s easy to find a credit card that doesn’t have an annual fee.

Restricted Transactions

You can’t make every type of transaction with a charge card. For example, you typically can’t transfer balances or make cash advances on a charge card.

Charge Card Benefits

Charge cards sometimes come with additional benefits that are not typically offered by regular credit cards. For example, your charge card may offer roadside assistance, extended warranty on certain purchases, car rental insurance, 90 day purchase protection, and travel accident insurance.

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