Charge card vs. credit card: What’s the difference?

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While charge cards and credit cards share a similar appearance and function, they operate differently. Both let you buy now and pay later, but their repayment terms can vary considerably.

Charge cards are less common than credit cards. CNBC Select reviews the key differences to help you decide which is right for you.

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Although charge cards and credit cards may be used interchangeably, they are not the same. Credit cards allow you to carry a balance from one billing cycle to the next, while charge cards typically need to be paid in full each month. Because of how charge cards function, things like interest rates, credit limits and approvals may differ from traditional credit cards.

Charge cards and credit cards are both great ways to pay for your day-to-day needs, but it’s important to know how they differ so you aren’t caught off guard.

Interest rates

Charge cards generally don’t allow you to carry a balance, so they don’t have interest rates associated with them. However, some charge cards may offer an optional pay-over-time feature that acts similarly to carrying a balance, which would come with interest.

Meanwhile, credit cards have interest rates because you can carry a balance. Interest rates can vary significantly by credit card and cardholder since your credit history is a factor.

As of December 2024, the average credit card APR is 21.76% according to the Federal Reserve. And because credit card issuers usually compound interest daily, your balance grows a little each day it goes unpaid. However, there are a number of credit cards with an introductory 0% APR period, typically ranging from six to 21 months, including the following:

Credit limit

Charge cards typically don’t have preset spending limits, so you may have more flexibility to make bigger purchases. But this doesn’t mean you have unlimited spending power. Instead, your purchases may be approved based on several factors including your income, repayment history and credit utilization ratio.

Credit cards have a maximum credit limit determined by your financial institution. If you attempt to spend more than your credit limit, your purchase may be denied or your card issuer may ask if you want to approve the transaction in exchange for an over-limit fee. You’ll also need to watch your credit utilization ratio with credit cards, as that makes up 30% of your FICO credit score.

Payment

Since charge cards generally don’t allow you to carry a balance, you must pay off your balance in full each month. There is no interest or minimum payment option. Any missed or late payments could result in fees and other penalties, depending on the card.

Credit cards give you the flexibility to carry your balance over time, which means you have the option to make only the minimum payment by the due date. However, the rest of your balance that you are carrying will begin to generate interest, unless you have a promotional APR offer.

Recommended credit score

Charge cards often have higher credit score requirements for approvals due to the risks of an uncapped spending limit. So you’ll want to aim for a good or excellent credit score (scores of 670 and above) to qualify for a charge card.

Credit cards, on the other hand, are much more accessible with fewer barriers to entry. There are a variety of credit cards available to many different credit profiles, including easy-to-get card options for those with bad credit or no credit at all.

Annual fee

Annual fees can vary considerably by card. There are both charge cards and credit cards with no annual fees, but charge cards often have higher annual fees. This is because charge cards have greater spending flexibility and the issuers are less likely to make money on interest charges.

Rewards and benefits

Both charge cards and credit cards can offer competitive rewards programs and other perks, but it ultimately boils down to your specific card.

Both charge cards and credit cards can affect your credit score.

Since charge cards don’t have a preset spending limit, they won’t affect your credit utilization rate. However, they affect other credit score factors like payment history, credit mix, amount owed and more, so it’s still important to practice good habits to build up your score.

Whether you should get a charge card or credit card comes down to accessibility and personal preference. Many charge cards are geared toward businesses, so it may be harder to open a personal one.

For those looking for a card with similar features, such as no preset spending limits*, Amex has a few options including the American Express® Gold Card and The Platinum Card® from American Express. Each card has its strength with the Amex Gold’s perks focused on dining and groceries and the Amex Platinum delivering more premium travel benefits. Both cards earn American Express Membership Rewards, which are some of the most versatile rewards points on the market.

If you prefer a more traditional credit card experience, there are a wide range of cards that could be a good fit. If you’re in the market for a rewards card, the Chase Freedom Unlimited® offers several valuable bonus categories and a generous welcome bonus — all for no annual fee.

Pro tip: You can pair this card with a Chase bank account

When you open a Chase Total Checking® account, you can earn a $300 bonus after you make at least $500 in direct deposits within 90 days of opening the account. You can also waive the monthly maintenance fee with qualifying activities.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every credit card article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit card products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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*No Preset Spending Limit means the spending limit is flexible. In fact, unlike a traditional credit card with a set limit, the amount you can spend adapts based on factors such as your purchase, payment, and credit history.

For rates and fees of the American Express® Gold Card, please click here.

For rates and fees of The Platinum Card from American Express®, please click here.