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

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

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A credit card, charge card, and debit card are the same things, right? Well, no, but you are not alone in thinking they are. The truth is, many people use the words interchangeably.  

The similarity is that they are both super handy, allowing you to shop without cash. All you need to do is swipe the card at a point of sale (POS) or use it online.

The card issuer avails a line of credit that makes the purchase possible. At the end of the billing cycle, you will need to pay for any amounts you use.

So, what about a debit card? Well, a debit card is not a line of credit. You can only spend the balance you have in your bank account.

But, the bank, at its discretion, can extend overdraft facilities. You get access to cash advances through the credit extension. And yes, when paying back the cash, there is the additional fee for overdraft and interest charges.

Our article will focus mainly on credit cards and charge cards. There are some distinct differences you may not be aware of.    

So, what are they?  

Salient Differences at a Glance

Before we go into an in-depth discussion of charge cards vs. credit cards, we can summarize the differences as below.

  • Repayments

You must clear charge card balances at the end of the billing cycle. Blockfi credit card allow for roll-over to the next month

  • Ownership

Charge cards have an annual fee. For credit cards, it depends on the issuer.

  • Spending Limit

Charge cards do not impose pre-set spending or credit limits. Credit cards have a spending limit

  • Excellent Credit Score Requirement

Charge cards yes. Credit cards are more lenient.

  • Impact on Credit Reports

Charge cards and credit card issuers both report to credit reference bureaus. But credit utilization does not impact the credit record with regards to charge cards.

  • Late Fees

Both credit cards and charge cards will impose late fees.

  • Interest and Debt

Zero debt or interest with charge cards as you must make full balance payments. You must pay interest with credit cards.

  • Incentives

Charge cards typically offer more incentives than credit cards.

  • Acceptance

Credit cards enjoy wider acceptance amongst vendors, at an international level. Charge cards, not so much.

  • Fraud protection

Yes for both charge cards and credit cards.

 Charge Cards vs. Credit Cards; Things to Know 

In exploring charge vs. credit cards and charge cards, there are words you will come across. These include credit limit, roll over-balance, and credit scores.  

Do take time to understand what each means. Let’s explore some of the salient points and terms, so that the key differences become clear.  

  1. Payments 

Remember every time you swipe that credit or charge card, you are taking a loan. That means you will have to pay the principal amount and interest.  

Now, here is where the other difference comes in. With a charge card, you have to pay the balance in full at the time you agreed with the issuer. 

Charge cards generally are the preferred option if you are sure you can pay on time.  

Credit cards are a little more lenient. You can rollover or revolve the balance to the next month in case you are unable to pay everything at once. The advantage is you get some breathing space with regards to the repayments. All you need to do is ensure that you make a minimum payment.   

The disadvantage is it gets more costly for you because the unpaid balance will attract interest.

  1. Credit Vs. Charge Cards: Qualification Criteria

Can just anyone qualify for a charge card and credit card? Well, there are some things card issuers look at. Do note, charge card requirements are a little more stringent. Do expect a credit check of your personal credit scores.

Now here is where another difference comes in. even with a bad credit score, you can still qualify for a credit card. We will expound on this a little more in the next point. And yes, we will show you what to do to improve your credit score. Lenders have the option of secured credit cards for clients with poor or nonexistent credit history.

The sad news is the same does not apply to charge cards. The lender will issue a card, only if you have a good to excellent credit score. 

  1. Impact of Non-Payment on Credit Scores

When was the last time you took a long, hard, and careful look at your credit report? Please get one today from the credit bureaus if you haven’t recently.

You see, every time you skip or make late payments on your credit or charge card, it goes to your credit report.  

And then there is the credit utilization rate which looks at your credit card balance and credit card limit.

Credit utilization factors in every time you spend a significant portion of your credit limit. It can affect your credit score, and not always in a good way. Experian reports that it can impact your score by up to 30%.

Here is a fantastic tip that will help you improve your credit scores. Low credit utilization indicates that you are not using up much of the credit you have available. It is a sign of financial discipline and prudence in spending. 

But, the reverse is also true. High credit utilization shows poor credit management. The reference bureaus will take note and it can hurt your credit scores.   

A poor credit score can affect your ability to get financing, jobs, or even apartments. But, there are affordable credit repair services to improve your scores.  

Credit repair professionals monitor your credit scores and correct any errors. They can also remove collection accounts from credit reports, and offer family credit management.  

You also get advice on effective credit control techniques to help maintain a perfect credit score.  

Do note, qualifying for a charge card depends on a good credit score. The issuer is taking a risk by not having preset limits while assuming that you can make on-time payments.  

  1. Spending or Credit Limit 

Have you tried to swipe your credit card and the POS declines? Well, one reason could be you have hit your spending or credit limit.

The credit limit is the amount the credit card issuer allows you to reach, but not surpass. Some companies will allow you to spend above the limit. But, be ready for over-limit or late fees charges.  

Charge card issuers will typically not limit your spending. We use the word typically, because they may have a cutoff depending on several factors. These include past purchasing behavior, payment history, and income.  

In the case that you need to make a big purchase, you must speak to the issuer. They will need to approve the amount beforehand.  

  1. Interest Rates

Let us delve a little more into the issue of interest rates on credit cards. The lenders calculate it using the Annual Percentage Rate or APR and balance.

The issuer will base the calculations on the type of credit card you have. There are two main types of credit card APR calculations.

  • Variable APR refers to interest rates that may change over time based on the index interest rates.
  • Fixed APR stays constant. But the issuer can change rates, but only after contacting you.

Do take time to learn the different credit card APRs. Purchase APR, for instance, is the interest you pay if you do not make the full credit card balance payment.

Penalty APR applies to late payments or spending above the credit limit. Balance Transfer APR is what you pay for any balances you transfer from one card to another.

With charge cards, the lender does not offer you credit lines as such. Remember you have to make full balance payments at the end of the billing cycle.

  1. Cost of Ownership 

Other than interest, charge card issuers make money by charging an annual fee. The fee will vary depending on the issuer. Some credit card companies will charge an annual fee, but not all.   

Here is a little secret we can share with you. Every time you use the revolving balance facility, the credit card issuer is smiling. Do you know why the inability to make on-time payments is a plus for them?

Simple, as we stated, the charged interest keeps piling up. And, there may be a separate late fee payment. Try to avoid falling into the trap of credit card debt at all costs.  

For charge cards, you make full payments every month. Users do not have the option to carry charge card balances to the next month. So, no roll-over interest to the company.

Do note though, the late fee can be quite high, so keep up with payments. And, the charge card issuers can report to reference bureaus in case of late payments.  

We reiterate this point. Please talk to credit management service providers. They provide reports anytime you need them. The monitoring of reports from the credit bureaus allows for the quick correction of any errors that will impact your credit scores.  

  1. Protection against Fraud

You get a notification of a purchase on your credit card. It shocks you because you have not bought anything. Realization dawns that someone is fraudulently using your card.

Without a second thought, you call the issuing company. Good move on your part. Not reporting such incidences makes you liable for any charges the fraudster accrues.

You will be happy to note that both credit and charge cards enjoy some level of protection against fraud. The Truth in Lending Act is one such measure. As a requirement, you are only liable for up to $50 in charges.

But, it only applies if the thief used the card at a point of sale. For online purchases you pay nothing. This protection applies to both business and personal credit or charge cards.

Another safeguard is the Electronic Funds Transfer Act or EFTA. Your liability covers linked accounts, overdrafts, and a minimum of $50.

Other protection measures include the Credit Card Accountability and Disclosure or CARD act. It protects you from hikes on interest rates by credit card issuers, floating due dates, and double cycling billing.

Please take the time to learn applicable protection measures depending on your country.

  1. Perks and Other Incentives

Credit card lenders are quite generous with the perks and incentives they offer. It could be something to do with the high level of competition. Such include travel miles, cash backs, and so on.

Charge cards go a step further to offer premium rewards. The issuers will offer bonuses and reward points to attract people to sign up. You can also get travel upgrades, travel insurance, and rewards on purchases like groceries and gas.

It is a good idea to put recurring expenses on charge cards so that you benefit from the incentives. Just make sure that you can make the full payments at the due date.

 

Credit Card or Charge Card: Which is the Better Option 

Both credit cards and charge cards have their benefits. It comes down to you as an individual when deciding on either one. It helps to understand your finances and goals when deciding.  

There are some salient points we can pick out from our article. You get more flexibility with credit cards. The revolving balance can come in handy in crunch times. An emergency can come up, making it hard for you to make the full monthly payments. 

But, as long as you make a minimum monthly payment you should be fine.  

And, even without an excellent credit score, you can still qualify for one. That means you can take advantage of credit repair companies to restore or build credit while getting access to cash. Do note, the set credit limit on the card and interest charges.  

Charge cards require you to have a good to perfect credit score. The card issuer may charge a high annual fee. You must keep up with the billing cycle in making repayments.

The issuers will look at several factors to determine whether to have a preset spending limit. There is also the option of negotiating in the case that you need to spend a significant amount.  

Do note, skipping payments will attract late fee penalties in both cases. The issuers may also report your payment history to the credit bureaus. The report will affect your credit score and borrowing money abilities.  

There is also the issue of acceptance and options. The reality is most vendors accept credit cards. The same does not apply to charge cards, especially at international levels.  

Charge cards generally charge foreign transaction fees. It significantly drives up the cost of the charge card. But remember, there is no spending limit, so that is a point in their favor.

You will also not find too many options when looking for charge card issuers. The opposite is not true for a credit card.  

Other considerations include the annual fees, unlimited spending, and credit lines. Also, having your own money in savings, debit card, or bank account, can help avoid credit or charge card usage.

Final Thoughts 

You now know the main differences between charge cards and credit cards. But, what we have highlighted above are just salient points.  

Do take time to do a little more research. Also, look at your financial resources, goals, and purchasing power before choosing.

Learn the impact of things like late fees, minimum payment, carry balances, annual percentage rate, and statement balance.

Other charge cards and credit cards terms are preset spending limit, credit history, available credit, and personal loans.  

Speak to experts like financial institution advisers, credit card issuers, credit repair professionals, and lending institutions. It does not hurt to have as much information as you can. Become your own personal finance expert to avoid mistakes.

NEW

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

 

Isn’t a credit card, a charge card, and a debit card the same? Well, no, but you are not alone in thinking they are. The truth is, many people use the words interchangeably.  

The similarity is that they are both super handy, allowing you to shop without cash. All you need to do is swipe the card at a point of sale (POS) or use it online.

The card issuer avails a line of credit that makes the purchase possible. At the end of the billing cycle, you will need to pay for any amounts you use.

So, what about a debit card? Well, a debit card is not a line of credit. You can only spend the balance you have in your bank account.

But, the bank, at its discretion, can extend overdraft facilities. You get access to cash advances through the credit extension. And yes, when paying back the cash, there is the additional fee for overdraft and interest charges.

Our article will focus mainly on credit cards and charge cards. You may not be aware of some of the differences between the two.    

So, what are they?  

Salient Differences at a Glance

Before we go into an in-depth discussion of charge cards vs. credit cards, we can summarize the differences below.

Repayments

Clear your charge card balances at the end of every billing cycle. Credit cards allow for roll-over to the next month.

Ownership

Charge cards have an annual fee. For credit cards, it depends on the issuer.

Spending Limit

Charge cards do not impose preset spending or credit limits. Credit cards have a spending limit.

Excellent Credit Score Requirement

Charge cards, yes. Credit cards are more lenient.

Impact on Credit Reports

Charge cards and credit card issuers both report to credit reference bureaus. But credit utilization does not impact the credit record with regards to charge cards.

Late Fees

Both credit cards and charge cards will impose late fees.

Interest and Debt

Zero debt or interest with charge cards as you must make balance payments. You must pay interest with credit cards.

Incentives

Charge cards typically offer more incentives than credit cards.

Acceptance

Credit cards enjoy wider acceptance amongst vendors at an international level. Charge cards, not so much.

Fraud protection

Yes, for both charge cards and credit cards.

Charge Cards vs. Credit Cards; Things to Know 

In exploring charge vs. credit cards and charge cards, there are words you will come across. These include credit limit, roll over-balance, and credit scores.  

Do take time to understand what each means. Let us explore some of the salient points and terms so that the differences become evident. 

Payments

Every time you swipe a credit or charge card, you are taking out a loan. That means you will have to pay the principal amount and interest.  

Now, here is where the other difference comes in. With a charge card, you have to pay the balance in full as per the time you agreed with the issuer. 

Charge cards generally are the preferred option if you are sure you can pay on time.  

Credit cards are a little more lenient. If you cannot pay the balance at once, you can roll it over or rotate it to the next month. The advantage is you get some breathing space with regards to the repayments. All you need to do is ensure that you make a minimum payment.   

The disadvantage is it gets more costly for you because the unpaid balance will attract interest.

Credit Vs. Charge Cards: Qualification Criteria

Can just anyone qualify for a charge card and credit card? There are some things card issuers consider. Charge card requirements are more stringent. Do expect a credit check of your credit scores.

Here is where another difference comes in. even with a bad credit score, you can still qualify for a credit card. We will expound on this a little more in the next point. And yes, we will show you what to do to improve your credit score. Lenders have the option of secured credit cards for clients with poor or nonexistent credit history.

The sad news is the same does not apply to charge cards. A lender will issue a card only if you have a good to excellent credit score. 

Impact of Non-Payment on Credit Scores

·      

When was the last time you took a long and careful look at your credit report? If you haven’t done it lately, get one today from the credit bureaus.

You see, every time you skip or make late payments on your credit or charge card, it goes to your credit report.  

And then there is the credit utilization rate which looks at your credit card balance and credit card limit.

Credit utilization factors in every time you spend a significant portion of your credit limit. It can affect your credit score, and not always in a good way. Experian reports that it can impact your score by up to 30%.

Here is a fantastic tip that will help you improve your credit scores. Low credit utilization indicates that you are not using up much of the credit you have available. It is a sign of financial discipline and prudence in spending. 

But, the reverse is also true. High credit utilization shows poor credit management. The reference bureaus will take note, and it can hurt your credit scores. 

A poor credit score can affect your ability to get financing, jobs, or even apartments. But, there are affordable credit repair services to improve your scores.  

Credit repair professionals monitor your credit scores and correct any errors. They can also remove collection accounts from credit reports and offer family credit management.  

You also get advice on effective credit control techniques to help maintain a perfect credit score.  

Do note, qualifying for a charge card depends on a good credit score. The issuer is taking a risk by not having preset limits while assuming that you can make on-time payments.  

Spending or Credit Limit 

Have you tried to swipe your credit card and the POS declines? Well, one reason could be you have hit your spending or credit limit.

The credit limit is the amount the credit card issuer allows you to reach but not surpass. Some companies will allow you to spend above the limit. But, be ready for over-limit or late fees charges.  

Charge card issuers will typically not limit your spending. We use the word ‘typically’ because they may have a cutoff depending on several factors. These include past purchasing behavior, payment history, and income.  

In the case that you need to make a big purchase, you must speak to the issuer. They will need to approve the amount beforehand.  

Interest Rates

Let us delve a little more into the issue of interest rates on credit cards. The lenders calculate it using the Annual Percentage Rate or APR and balance.

The issuer will base the calculations on the type of credit card you have. There are two main types of credit card APR calculations.

  • Variable APR refers to interest rates that may change over time based on the index interest rates.
  • Fixed APR stays constant. But the issuer can change rates but only after contacting you.

Do take time to learn the different credit card APRs. Purchase APR, for instance, is the interest you pay if you do not make the entire credit card balance payment.

Penalty APR applies to late payments or spending above the credit limit. Balance Transfer APR is what you pay for any balances you transfer from one card to another.

With charge cards, the lender does not offer you credit lines as such. Remember to make entire balance payments at the end of the billing cycle.

Cost of Ownership 

Other than interest, charge card issuers make money by charging an annual fee. The fee will vary depending on the issuer. Some credit card companies charge annual fees, but not all.   

Here is a little secret we can share with you. Every time you use the revolving balance facility, the credit card issuer is smiling. Do you know why the inability to make on-time payments is a plus for them?

Simple, as we stated, the charged interest keeps piling up. And, there may be a separate late fee payment. Try to avoid falling into the trap of credit card debt at all costs.  

For charge cards, you make complete payments every month. Users do not have the option to carry charge card balances to the next month. So, no roll-over interest to the company.

Do note, the late fee can be very high, so keep up with payments. And, the charge card issuers can report to reference bureaus in case of late payments.  

We reiterate this point. Talk to your credit management provider. They provide reports anytime you need them. Monitoring the reports from credit bureaus allows for the quick correction of any errors that will impact your credit scores.  

Protection against Fraud

You get a notification of purchase on your credit card. It shocks you because you have not bought anything. Realization dawns that someone is fraudulently using your card.

Without a second thought, you call the issuing company. Good move on your part. Not reporting 

such incidences makes you liable for any charges the fraudster accrues.

You will be happy to note that both credit and charge cards enjoy some level of protection 

against fraud. The Truth in Lending Act is one such measure. As a requirement, you are only liable for up to $50 in charges.

But, it only applies if the thief used the card at a point of sale. For online purchases, you pay nothing. This protection applies to both business and personal credit or charge cards.

Another safeguard is the Electronic Funds Transfer Act or EFTA. Your liability covers linked accounts, overdrafts, and a minimum of $50.

Other protection measures include the Credit Card Accountability and Disclosure or CARD act. You’re protected from interest rate hikes by credit card issuers, floating due dates, and double billing.

Please take the time to learn applicable protection measures depending on your country.

Perks and Other Incentives

Credit card lenders are a bit generous with the perks and incentives they offer. It could be something to do with the high level of competition. Such include travel miles, cash backs, and so on.

Charge cards go a step further to offer premium rewards. The issuers will offer bonuses and reward points to attract people to sign up. Additionally, you can get benefits, travel upgrades, and travel insurance on purchases like groceries and gas.

It is a good idea to put recurring expenses on a charge card to get the incentives. However, make sure that you can make the full payment at the due date.

 

Credit Card or Charge Card: Which is the Better Option 

Both credit cards and charge cards have their benefits. It comes down to you as an individual when deciding on either one. It helps to understand your finances and goals when making a decision.  

There are some salient points we can pick out from our article. You get more flexibility with credit cards. The revolving balance can come in handy in crunch times. An emergency can arise, making it difficult for you to make the monthly payments. 

But, as long as you make minimum monthly payments, you should be fine.  

And, even without an excellent credit score, you can still qualify for one. That means you can take advantage of credit repair companies to restore or build credit while getting access to cash. 

Make a note of the set credit limit on the card and interest charges.  

Charge cards require you to have a good to perfect credit score. The card issuer may charge a high annual fee. Keep up with the billing cycle in making repayments.

The issuers will look at several factors to determine whether to have a preset spending limit. 

There is also the option of negotiating in the case that you need to spend a significant amount.  

Do note, skipping payments will attract late fee penalties in both cases. The issuers may also report your payment history to the credit bureaus. The report will affect your credit score and borrowing money abilities.  

There is also the issue of acceptance and options. The reality is most vendors accept credit cards. The same does not apply to charge cards, especially at international levels.  

Charge cards generally charge foreign transaction fees. It significantly drives up the cost of the charge card. But remember, there is no spending limit, so that is a point in their favor.

You will also not find too many options when looking for charge card issuers. The opposite does not hold for a credit card.  

Other considerations include the annual fees, unlimited spending, and credit lines. Also, having your own money in savings, debit card, or bank account can help avoid credit or charge card usage.

Final Thoughts 

You now know the main differences between charge cards and credit cards. But, what we have highlighted above are just salient points.  

Do take time to do a little more research. Also, look at your financial resources, goals, and purchasing power before choosing.

Learn the impact of late fees, minimum payment, carry balances, annual percentage rate, and statement balance.

Speak to experts, financial institution advisers, credit card issuers, credit repair professionals, and lending institutions. It does not hurt to have as much information as you can. Become your finance expert to avoid mistakes.

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