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Charge cards allow you to make a purchase on credit, but they require payment in full every period.
Most non-debit cards are credit cards, which provide flexibility to on when to pay your balance.
If you pay off your balance in full every month, you won’t pay any interest.
What Is a Charge Card?A charge card requires you to pay off your full statement each month, with no option of carrying over your balance to the next billing cycle. Unlike credit cards, charge cards typically don’t have a preset spending limit, providing greater flexibility in spending. However, failure to pay the full balance by the due date can result in hefty penalties or the suspension of charging privileges. Charge cards often come with annual fees, but can offer generous rewards programs and benefits tailored to frequent travelers or business owners.What Is a Credit Card?Credit cards allow you to borrow money up to a certain limit to make purchases, transfer balances, or take cash advances. Unlike charge cards, credit cards enable you to carry a balance from one month to the next, accruing interest on any unpaid amounts. Credit cards are versatile financial tools, and can help you build a credit history when used responsibly. They often come with various incentives, such as rewards points, cash back, and introductory 0% APR offers for new accounts.Comparing Charge Cards and Credit CardsPayment Flexibility and RequirementsWhile charge cards require the full repayment of the balance each month, credit cards offer the flexibility to make minimum payments over time, albeit with interest.Impact on Credit ScoresWhen it comes to building credit with charge cards versus credit cards, both cards can influence your credit score, but the way they’re reported to the credit bureaus differs, especially in terms of credit utilization. Rewards and BenefitsCharge cards often target specific consumer segments with tailored rewards and benefits, whereas credit cards offer a wider range of rewards programs to suit a diverse array needs. Fees and Interest RatesUnderstanding the fee structure and interest rates is crucial; charge cards may have higher annual fees, but credit cards could accrue significant interest if balances are carried month to month.Choosing Between a Charge Card and a Credit CardConsider your financial habits, ability to pay off balances, and what you value most in a card. If you prefer to avoid interest and can commit to paying in full each month, a charge card might suit you. For those who value flexibility in payments and want to build credit gradually, a credit card could be the better choice. Evaluate the rewards, benefits, and costs associated with each to make an informed decision.FAQs
Generally, no. Charge cards require that you pay off your balance in full each billing cycle, with no option to carry over balances. However, some charge cards may offer pay over time features to some cardholders for certain large purchases.
Typically, charge cards do not have a predefined spending limit, though purchases are approved based on your credit profile, spending patterns, and financial resources.
Both can positively affect your credit score when used responsibly. However, credit cards directly impact your credit utilization ratio, a significant factor in credit scoring models.
Approval for a charge card generally requires a good to excellent credit score, similar to many credit cards. The decision often depends on your financial history and creditworthiness.
Yes, many charge cards offer credit card rewards programs, including travel benefits and points on purchases, which can be comparable to or even exceed those offered by credit cards.
Eric Rosenberg
Freelance Writer
Eric Rosenberg is a finance, travel, and technology writer in Ventura, California. He is a former bank manager and corporate finance and accounting professional who left his day job in 2016 to take his online side hustle full-time. He has in-depth experience writing about banking, credit cards, investing, and other financial topics, and is an avid travel hacker.
When away from the keyboard, Eric enjoys exploring the world, flying small airplanes, discovering new craft beers, and spending time with his wife and little girls.
You can connect with him at Personal Profitability or EricRosenberg.com.
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