Charge Card vs. Credit Card: What’s the Difference?

The terms “charge card” and “credit card” are often used interchangeably, but they are not the same. This is a common mistake, as both charge cards and credit cards are used to make purchases and they look nearly identical. So it’s easy to get confused.

I wrote this guide to help clear up any misconceptions between the two cards so you can understand the key differences.

What is a Charge Card?

A charge card is a type of financial payment instrument that allows cardholders to purchase products, goods, and services on credit while paying the balance at a later date. Unlike a credit card, there’s no predefined spending limit, and the cardholder is required to pay the full balance of the card each billing cycle. 

Charge cards are less about borrowing and more about flexible purchasing power—with the discipline of full repayment to the card issuer every month. 

How Does a Charge Card Work?

Each purchase made with a charge card accumulates over a billing cycle. Similar to a credit card, charge cards can be used to make everyday purchases both in-person and online. 

While charge cards do not have preset spending limits, this does not mean that cardholders can buy whatever they want. Issuers have unofficial spending limits for each cardholder based on their purchase history and other financial patterns. 

Also like a credit card, the card issuer sends a monthly statement at the end of each billing cycle to the cardholder. But the statement does not have a minimum payment amount, and requires the cardholder to pay in-full for all purchases made during that cycle. 

Who Are Charge Cards For?

Charge cards are typically for people with excellent credit and enough money in the bank to pay off their statements each month. These cards often have high annual fees and exclusive, luxury perks. 

One example of a charge card is the American Express Centurion card—better known as the “black card.” This is an invitation-only card reserved for Amex’s biggest spenders and high-net-worth individuals. 

While Amex doesn’t publicly disclose the details of the card, we’ve found that there’s a $10,000 initiation fee and a $5,000 annual fee. This far surpasses the annual fees of a regular credit card (often free or between $100 and $650 per year). Plus, Amex requires black card users to spend at least $250,000 on the card annually. 

But the perks can pay for themselves for big spenders, like a $1,000 discount on any private jet booking made through Centurion Member Services or up to $1,000 statement credit for spending at Saks Fifth Avenue.  

What’s the Difference Between a Charge Card and a Credit Card?

Charge cards and credit cards, although similar, have five key differences. Let’s take a closer look at each one:

1. Charge Cards Don’t Have Spending Limits

Unlike credit cards, charge cards don’t have pre-defined spending limits. This offers significantly more purchasing freedom for cardholders. You could pay for big purchases, like a car or wedding, on your charge card to get your rewards without being capped by traditional spending limits from credit cards.

But it’s important to note that “no pre-set limit” does not mean unlimited spending. Card issuers still set limits based on credit, income, spending habits, and payment history. 

2. Charge Card Balances Are Paid In-Full Every Month

With a credit card, you could spend $3,000 in a billing cycle, and your statement may say the minimum balance due is just $120 (and you’ll pay interest on whatever you don’t pay).

That’s because credit cards work on a revolving credit cycle. Whatever you pay gets deducted from what you owe, and you can continue spending the following month up to your credit limit.

This is not the case with charge cards, what you spent during that cycle must be paid in full. Failure to pay off your charge card will result in a hefty late fee, and potentially suspend use of the card. 

3. You Must Have Excellent Credit to Get a Charge Card

People with bad or average credit can still get credit cards. But issuers won’t just hand out charge cards to anyone. 

High spending is risky for issuers. So they’ll only extend short-term lending to people who have a proven history of paying back large balances. If you have thin credit, no credit, or bad credit, it’s unlikely you can get a charge card. 

4. There’s No Credit Utilization Impact On Charge Cards

One important factor of anyone’s credit score is the utilization ratio. This represents roughly 30% of a FICO score, and it’s calculated by dividing your revolving credit by the total available credit. 

For example, let’s say you have two credits—the first has a $10,000 limit, and the second has a $15,000 limit. You spend $5,000 per month between the two cards, so your credit utilization ratio is 20% 

Since charge cards don’t have credit limits, usage doesn’t affect your utilization ratio. 

5. Charge Cards Are Not Widely Available

Roughly 82% of US adults have at least one credit. It’s by far the most popular type of consumer lending option in terms of total number of users. 

Charge cards are far less popular and harder to apply for. We actually couldn’t find any updated or accurate statistic that shows exactly how many people have them. 

But looking at the Amex black card, it’s estimated that only 100,000 people have one across the globe. This is just a fraction of the 100+ million cardholders that Amex services worldwide. 

Bottom Line

While they may look similar, charge cards and credit cards are not the same. Charge cards require you to pay off the entire statement balance in full each credit cycle, whereas credit cards let you carry a monthly balance. Charge cards also don’t have pre-set spending limits (although this doesn’t mean you have unlimited spending).