A Charge card and a credit card are the terms that are considered to be the same by most people; however, this is not the case. Both of these cards have their own uses, and no one card is better than the other.
Charge Card vs Credit Card
The difference between a charge card and a credit card is that in charge card, you are required to pay the balance at the end of the month, whereas in credit card, you can pay your balance over a period of time. The credit in charge cards is not usually extended. In case of credit cards, if you are not able to pay the whole amount in one go, then you have to pay it with interest later on.
A charge card looks similar to a credit card. They play the same role as a credit card does, is to help you make purchases. However, the one thing which is different is that you have to pay the balance immediately.
Comparison Table Between Charge Card and Credit Card (in Tabular Form)
|Parameter of Comparison||Charge Card||Credit Card|
|Role||A charge card allows users to make purchases for which they are required to pay at the end of the month before the due date.||A credit card also enables its customers to make purchases by providing them small loans. The amount for the purchases has to be paid over a period of time.|
|Spending Limit||There is no pre-defined spending limit here. However, it also depends on your payment history and record of your credits.||A limit is decided on the basis of financial details.|
|Payment||Payment has to be done each month; otherwise, the penalty charges will be imposed on the user.||A minimum decided by the card issuer has to be paid. The remaining balance can be paid overtime along with extra charges.|
|Interest||No interest will be charged in the case of the charge card as the user has to make the payment in full.||An interest rate has to be paid depending on various factors if you do not pay your balance before the due date.|
|Consideration||A charge card should only be considered when you are sure of regular cash flow.||A credit card is used by the people who make unplanned purchases.|
What is Charge Card?
Charge cards are just like a credit card. They allow customers to make purchases for which they can pay later each month.
The cardholders here are required to pay the whole amount in a lump sum so as to avoid any extra charges or the risk of getting their card dismissed.
There is no pre-defined spending limit here. However, this doesn’t mean that you have the power to make unlimited expenses.
Your purchasing limit depends on your payment history, credit record, and financial information provided by you.
Having no prior set spending limit is the reason why a charge card requires its users to pay an annual fee.
Charge cards should be considered by those who can pay their balance every month. Charge cards offer many more benefits than credit card companies do.
This is the reason why charge cards are usually expensive than credit cards.
What is Credit Card?
A credit card allows users to buy stuff and pay for them over a period of time. The payment has to be done until your credit card bill is due.
The working of credit cards can be perceived as receiving small loans to make purchases.
Payment flexibility is the reason why people consider credit cards in the first place. There is no pressure of paying the total amount each month.
In the case of a credit card, a minimum amount is decided by the issuer. The consumer has the option to pay the minimum amount or any amount between the minimum and total amount.
The interest rate, called Annual Percentage Rates, is charged onto the remaining balance.
The credit cards should be considered by those who want to have flexibility in how much of their dues they wish to pay off every single month.
The interest rate, there will always be less than what you will have to pay in the case of charge cards.
Main Differences Between Charge Card and Credit Card
- Charge card enables their consumers to make expenses and pay for them each month. However, a credit card allows you to make purchases and pay them later on until your credit card bill is due.
- In the case of charge cards, there is no pre-set spending limit on it. However, it doesn’t mean you make unlimited purchases. Your purchasing ability depends on your payment history, credit records, etc.
On the other hand, there is a pre-defined spending limit in the case of credit cards. No user can go beyond that limit until their limit gets increased by their respective bank.
- Charge cardholders have to make their payment in full every month. Not being able to do so results in a hefty penalty on them.
In the case of credit cardholders, they are required to pay any balance between the minimum amounts, set by the issuer, to the total amount. They have to pay interest on the money due.
- The charge cardholders are not charged with any interest as they have to make the whole payment each month. However, interests are imposed on credit cardholders if they are not able to pay the whole amount in full within the due date.
- Charge cards are better for people who are sure that they can pay the balance by the end of the month. However, credit cards are best suited for the people who have to make unplanned expenses and are not sure when they will be able to return the whole money back.
Charge cards allow people to buy things, for which they are required to pay at the end of the month.
Therefore, it is important to know if you will be able to pay the money back each month. Not doing so will result in a heavy penalty on you.
Credits cards, however, give you the luxury to pay the balance over a period of time. You still have to pay the amount within a timeframe, which is not as small as a month.
The interest rate is also imposed on you if you are not able to pay the whole amount back in a lump sum.
However, this interest rate is very low as in comparison to that of the charge cards’ penalty fee.