You can use and charge cards to make purchases where credit cards are accepted, and both types of cards can help if you make on-time payments.
However, charge cards don’t carry interest and require you to pay off your balance fully each month. They also don’t tend to have preset spending limits, which could come in handy if you’ve ever worried about maxing out your card limit.
Depending on your financial goals, either card type could make sense, but most credit card issuers have stopped offering charge cards.
A charge card is similar to a credit card, with a few key differences. There’s typically no preset spending limit, so there’s less worry of maxing out your .
Charge cards also don’t have traditional , so there’s no risk of racking up thousands of dollars worth of debt through a high APR (annual percentage rate) and . However, you must fully pay off your monthly balance or pay potential fees.
You can use your charge card just like a credit card, making purchases wherever credit cards on your card network (Visa, Mastercard, etc.) are accepted. That means you can buy gas, groceries, online purchases, and more.
Since charge cards don’t have preset spending limits, you have increased flexibility with your purchasing power. A preset spending limit doesn’t mean you can spend as much as you want. Rather, it’s a limit that your financial institution can adjust according to your spending habits, credit history, and other factors.
For example, a credit card could have a $10,000 credit limit. That means you can spend up to $10,000 on one or more purchases. Once you reach that limit, you can’t spend more on your card until you make a partial or complete payment. In addition, carrying a high balance on a credit card can affect your , which could impact your credit score.
With a charge card, your card issuer doesn’t typically have a specific limit on how much you can spend. Instead, you might have a certain amount of spending power at any given time, which you can often check in your online account or by contacting your credit card company. Charge cards don’t affect your credit utilization because they can’t carry a balance.
Credit cards have hard credit limits that only the card issuer can change, typically through an automatic or manual credit review process. For instance, if you’re approved for a credit card with a $5,000 credit limit, that’s how much you can spend on your card.
Charge cards don’t have preset spending limits. That means if you’re approved for a charge card, you won’t receive a preset limit on how much you can spend on your card. Remember that your spending power could change depending on your financial situation and overall creditworthiness.
You can carry a balance on a credit card because you can make a partial payment toward your balance each billing cycle. Carrying too high of a balance can show up on your credit report and impact your credit score because of credit utilization, which is a percentage of how much credit you’re using of your total available credit.
You can’t carry a balance with a charge card because you must pay your full balance each month. That means charge cards can’t affect your credit utilization or impact your credit score because of high credit utilization.
Most credit cards require you to make at least the each billing period to avoid late payment fees and missed payment reports sent to the .
Charge cards require you to pay your balance in full each month, so there’s no option to make partial or minimum monthly payments.
Interest and fees
If you carry a balance with a credit card, that balance will accrue interest. If you continue to carry a balance, interest can start accruing on existing interest charges. This is called compound interest, which you want to avoid to stay out of .
Most credit card issuers will also charge if you miss a payment. However, many credit cards have grace periods between the end of your billing cycle and your statement’s due date, where you can avoid interest and late fees.
Charge cards don’t charge interest because you can’t carry a balance from one month to the next. Though, you could face fees and/or other penalties if you miss a payment.
Credit cards are easily more available than charge cards. If you browse the card listings of major card issuers, you won’t find many charge cards. In fact, you might not find any at all.
is one of the only major credit card companies offering consumer products resembling traditional charge cards. To be clear, these Amex cards aren’t charge cards, but they share some similarities to what a charge card issuer might offer.
Pros
Cons
-
You have to pay the balance in full each month
-
Typically have annual fees
-
Not as many available compared to credit cards
Credit cards are the better fit for most people’s personal finance goals. They can help build your credit score and payment history and give you access to funds in an emergency. In addition, can provide points, miles, or cash back as well as many perks and benefits. You also have more credit card options available than charge cards.
Charge cards are helpful if you want flexible spending power to align with your spending patterns. They also don’t accrue any interest, but only because you can’t carry a monthly balance.
Charge cards and credit cards share many similarities. Still, we recommend using credit cards because they offer more options and most people don’t need the flexible spending limits of charge cards.
Charge cards can help , similar to credit cards if you actively use them and make on-time payments. However, charge cards require you to pay off your balance each month fully or you’ll have to pay a late fee.
Charge cards typically don’t have a preset spending limit, which could be helpful if your purchase amounts vary each month. For example, a business owner could have large purchases during a busy month but wouldn’t have to worry about maxing out their card with no preset spending limit.
In addition, charge cards don’t carry interest since they require full monthly payments. This could be useful to avoid the slippery slope of compounding interest and .
Many charge cards have , while you can find plenty of no-annual-fee credit cards. There are also many more than charge cards, as most major credit card companies no longer offer charge cards. If you’re interested in a charge card, there are limited options.
Editorial Disclosure: The information in this article has not been reviewed or approved by any advertiser. All opinions belong solely to the Yahoo Finance and are not those of any other entity. The details on financial products, including card rates and fees, are accurate as of the publish date. All products or services are presented without warranty. Check the bank’s website for the most current information. This site doesn’t include all currently available offers. Credit score alone does not guarantee or imply approval for any financial product.
