Charge Card vs Credit Card: Which is the Best for You? - NerdWallet
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Charge Card vs Credit Card: Which is the Best for You?

There are two main differences between a charge card and a traditional credit card.

  • First, charge cards have no credit limit.
  • Second, charge card’s balances are due at the end of the current month, or else you instantly incur a penalty in the ballpark of 3% (which is a huge interest rate when annualized).

This means that cardholders have to plan their spending more carefully in order to make sure their balance is paid consistently.

Our 2 favorite charge cards are the Premier Rewards Gold Card from American Express and The Platinum Card® from American Express.

Premier Rewards Gold Card from American Express

Apply Now on American Express's secure website

Cons

  • Has annual fee
  • Needs excellent credit

Bonus Offer

Receive 25,000 Membership Rewards® Points after you spend $2,000 on purchases on your new Card in your first 3 months of Card Membership.

Annual Fee

$0 for the first year, then $195

Intro APR Promotions

None

APR

  • Purchase: N/A
  • Penalty APR: Up to 2.99%

Card Details

  • Receive 25,000 Membership Rewards® Points after you spend $2,000 on purchases on your new Card in your first 3 months of Card Membership.
  • 3X points for flights booked directly with airlines. 2X points at US restaurants, US gas stations, and US supermarkets. 1X points on other purchases. Terms and limitations apply.
  • No matter where you’re traveling, when you use your Premier Rewards Gold Card there are no foreign transaction fees from American Express.
  • $100 Airline Fee Credit. Up to $100 a year in baggage fees and more at one airline.
  • With The Hotel Collection, you can get up to a $75 hotel credit on qualifying charges, plus a room upgrade at check-in if it’s available, when you book a stay of at least two consecutive nights.
  • There is a $0 introductory annual fee for the first year, then $195.
  • Terms and limitations apply.
  • View Rates and Fees

  • The Premier Rewards Gold Card from American Express gets you 3x points on airfare, and 2x on gas and groceries, with an annual fee of $0 for the first year, then $195. You get a sign-up bonus too: Receive 25,000 Membership Rewards® Points after you spend $2,000 on purchases on your new Card in your first 3 months of Card Membership..  Points can be transferred to your favorite airline or hotel programs.
  • The Platinum Card® from American Express has a crazy $450 annual fee… but it just might be worth it, given that it has no foreign transaction fee, lounge access, and a ton of other goodies.

The Platinum Card® from American Express

Apply Now on American Express's secure website

Pros

  • No foreign transaction fee

Cons

  • Has annual fee
  • Needs excellent credit

Bonus Offer

Earn 40,000 points after you spend $3,000 on purchases on your new Card in your first 3 months.

Annual Fee

$450

Intro APR Promotions

None

APR

  • Purchase: N/A
  • Penalty APR: Up to 2.99%, Variable

Card Details

  • Get 40,000 points after you use your new Card to make $3,000 in purchases in your first 3 months.
  • $200 Airline Fee Credit. Up to $200 a year in baggage fees and more at one airline.
  • There are no foreign transaction fees with your Platinum Card.
  • New! Enroll to enjoy the benefits of complimentary Hilton HHonors™ Gold Status.
  • Get reservations with Platinum Card® Concierge to enjoy an exquisite dining experience with the #AmexPlatinum Dining Program. Learn more.
  • No interest charges because you pay your balance in full each month.
  • Terms and limitations apply.
  • View Rates and Fees

While American Express has been a longtime provider of charge cards, a broad emphasis on balancing budgets and maintaining good credit scores has made the cards an appealing option to a growing sector of consumers who see benefits in the discipline required to use a charge card rather than a credit or debit card. There are, however, a mix of pros and cons that should be considered before signing up for a charge card:

Pros

As has already been discussed, charge cards’ requirement that holders pay their entire balance at the end of every month, and the steep penalties incurred by those who fail to do so, enforces responsible spending habits. It also allows cardholders to avoid longer-term costs like growing interest liabilities on long-standing credit card balances and overdraft fees on debit cards.

With American Express specifically, the potential for earning Membership Rewards Points that comes with a gold or platinum charge card exceeds the ability to earn points with, for example, one of American Express’ other rewards credit cards, the Blue Cash Preferred® Card from American Express. An added plus here is the charge cards’ ability to transfer points between many top airline and hotel arrangements.

Charge cards can also be a strategy for improving your credit rating by forcing cardholders to build up a history of timely payments and low balances.  For those who can stick to the payment schedule, a charge card can be a great way to boost an ailing credit score.

Finally, charge cards have the advantage of not coming with a set credit limit. It should be noted, though, that the issuer can cancel your card at any time if it does not appear that you will be able to pay off the charges.

Cons

While the monthly settling of balances required by a charge card can be a road to financial health for those who can stick to the schedule, failure to do so can become an expensive nuisance, generally more expensive than credit cards. For example, the Premier Rewards Gold Card from American Express carries a $37 fee for late payment. Two unpaid billing periods in a row could land you an even stiffer penalty equal to 2.99% of the delinquent amount. A month of spending with that kind of penalty works out to a significantly higher APR than on most credit cards.

If you already have a balance to deal with, you’re better off taking advantage of the 0% introductory APRs available with many balance transfer credit cards for 18 months or more.

And as far as rewards are concerned, some of the charge cards offered by Amex and Chase are unable to match the 2% cash back rewards available through some competing cards, depending on your own spending habits. But, it’s important to consider as well that a charge card’s points may be more valuable in certain situations, like if you need to use them for a frequent flyer mile ticket.

The Result: Tie

Widely-used models for rating credit scores, like Vantage Score or FICO, don’t use charge card balances when calculating your score. On the other hand, they also ignore the credit lines from charge cards when determining you “credit utilization” rating. So, a charge card that gets paid off in a timely manner can help a credit score damaged by significant outstanding balances, but someone with small balances who wants to micro-manage their credit score might do better with a credit card.

Charge cards have become relatively rare amongst American consumers today. While the most well-known provider of the cards is American Express and Diners Club (no longer accepting new US applicants), and some up-market retailers have also begun offering them.

In general, charge cards can seem to be the perfect way to develop fiscal discipline and improve a poor credit rating. But, the cost of failing to live up to this responsibility is high, maybe prohibitively high for those who can’t pay down their entire balance monthly.

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  • Angelsosa

    I did apply for a credit card and they did’t approve my application

  • Angelsosa

    I did apply for a credit card and they did’t approve my application

  • one-visa.com

    Thanks for this useful information. In my point of views there are much more difference between the Charge Card and Credit Card. In general Charge Card can make to be the perfect way to develop and improve the poor credit rating and have no Credit limits. While Credit Card is depend upon your Credit score history.