What is the Difference Between a Charge Card and a Credit Card?

Just about everyone knows what a credit card is, but many people are unaware of what a charge card is, and what the difference is between the two. To add to the confusion, many businesses can use the terms interchangeably, because the “charging” part is the point of both types of card. The primary differences between charge cards and credit cards are interest charged on balances, and requirements concerning the payment of balances.

Charge cards were the first form of plastic card introduced to the consumer market. They were often issued by retailers for use in their specific stores, and then became available for wider use. Charge cards very often will not have a monthly spending limit, or a limit at all, but the flip-side of that freedom is that whatever you spend in a billing cycle must be repaid at the end of the billing cycle. There is no minimum payment you can make, because by practice and by definition, charge cards demand that the balance be paid in full at the end of every billing cycle. This is because charge cards do not charge interest on your balance. Thinking of charge cards as short-term loans is an easy way to distinguish them from credit cards.

Credit cards, on the other hand, very often do come with a spending limit. You may get a credit card with a limit of, say, $5,000, and you can’t go beyond that. Credit cards also offer a minimum monthly payment option, so you could conceivably not pay off the total of what you owe for a very long time. The flip-side of this payment convenience is that credit cards charge interest on your balance, and sometimes this interest rate can be devastatingly high. The interest rate can also be raised by the credit card company at will. Many people can’t get out from under their debt because their interest rates just keep adding to their total balance.

To learn more about the differences between credit cards and charge cards, and which option might be the best for you, be sure to read “Basics of a Charge Card,” “The PROS and CONS of Charge Cards,” and “What is a Charge Card.”