Charge Card vs Credit Card: Difference and Comparison

A Charge card and a credit card are the terms that are considered the same by most people; However, this is not the case.

These cards have pros and cons; no one card is better for all use cases.

Key Takeaways

1. Charge cards and credit cards are both payment cards that allow consumers to make purchases without using cash.
2. Charge cards require payment of the total balance each month, while credit cards allow the option to carry a balance over time.
3. Charge cards often come with higher fees and stricter requirements than credit cards.

Charge Card vs Credit Card

A charge card requires the balance to be paid off in full at the end of each billing cycle, while a credit card allows the balance to be carried over with interest. Charge cards often have higher credit limits and exclusive perks. Credit cards may have rewards programs and can help build credit history.

A charge card looks similar to a credit card. They play the same role as a credit card does, which is to help you make purchases.

However, the one thing which is different is that you have to pay the balance immediately.

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Comparison Table

Parameter of Comparison	Charge Card	Credit Card
Role	A charge card allows users to make purchases they must pay at the end of the month before the due date.	A credit card lets customers make purchases by providing them with small loans. The amount for the purchases has to be paid over some time.
Spending Limit	There is no pre-defined spending limit here. However, it also depends on your payment history and the record of your credits.	A limit is decided based on financial details.
Payment	Payment has to be made each month; Otherwise, 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 know your regular cash flow.	A credit card is used by people who make unplanned purchases.

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What is Charge Card?

Charge cards are just like credit cards. They allow customers to make monthly purchases for which they can pay later.

The cardholders here must pay the whole amount in a lump sum 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 why a charge card requires users to pay an annual fee.

Charge cards should be considered by those who can pay their monthly balance.

Charge cards offer many more benefits than credit card companies do.

This is why charge cards are more expensive than credit cards.

 

What is Credit Card?

A credit card allows users to buy and pay for stuff over a period. The payment has to be done before 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 to pay the total amount each month.

In the case of a credit card, the issuer decides a minimum amount. The consumer can pay the minimum or an amount between the minimum and total dues.

The interest rate, called the Annual Percentage Rate, is charged onto the remaining balance.

Credit cards should be considered by those who want flexibility in how much of their dues they wish to pay off every month.

The interest rate will always be less than what you will have to pay in the case of charge cards.

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Main Differences Between Charge Cards and Credit Cards

1. Charge card enables their consumers to make expenses and pay for them each month.
2. However, a credit card allows you to make purchases and pay them later until your credit card bill is due.
3. In the case of charge cards, there is no pre-set spending limit on them. 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 respective bank increases their limit.
4. 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.
5. Charge cardholders are not charged with any interest as they have to make the monthly payment. However, interest is imposed on credit cardholders if they cannot pay the whole amount in full within the due date.
6. 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 people who have to make unplanned expenses and are not sure when they will be able to return the total money.

References

1. https://repository.law.umich.edu/cgi/viewcontent.cgi?article=4617&context=mlr
2. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2248804
3. https://www.degruyter.com/view/journals/rne/2/2/article-rne.2003.2.2.1018.xml.xml