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What are charge cards?

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Charge cards are similar to standard credit cards with one major exception.

Many people hearing the term charge card will say, “Charge what?”

It’s hard to blame them: You don’t see charge cards much anymore. Today, the only major provider still offering them is American Express. Other issuers stick to credit cards.

But charge cards haven’t died off yet. In fact, there are still a few excellent ones — like the travel powerhouse The Platinum Card® from American Express.

Here’s how charge cards differ from your typical credit card.

What is a charge card?

What’s the biggest difference between a credit card and a charge card? You can carry a balance month to month on a credit card. With a charge card, you have to pay your balance in full each month.

An easy way to tell if you’re looking at a charge card is by checking a card’s terms and conditions. For instance, here’s the pricing information for a credit card:

how a credit card differs from a charge card
See the interest rates for “Purchase Annual Percentage Rate,” “Balance Transfer APR” and “Cash Advance APR”? You’ll also find information about an interest grace period and the minimum interest charge. This is a clear indication that you’re looking at a credit card.

Now look at the pricing information for The Platinum Card® from American Express (see Rates & Fees):
The Platinum Card from American Express Terms and Conditions
There’s no information about interest payments anywhere. Here, you’re looking at a charge card.

Did you know?

Charge cards trace their roots back to the late 1800s, when companies issued metallic “charge plates” and “charge coins.” These were used to imprint customer information onto sales slips.

Can I apply for a charge card?

Card providers typically require good to excellent credit of 680 or higher for charge cards. Because you pay your balance in full each month, your issuer wants to know that you’re likely to repay your debt.

Compare cards with charge card features

Updated May 21st, 2019
Name Product Welcome Offer Rewards Annual Fee
60,000 points after spending $5,000 in your first 3 months
5x points on flights booked directly or flights and hotels booked through American Express Travel. 1x points on all other purchases
$550
Get 5x Membership Rewards® points on flights booked directly with airlines or with American Express Travel and 5x points on eligible hotels booked on amextravel.com. Rates & fees
35,000 points after spending $2,000 in the first 3 months
3x points on airfare booked directly with airlines; 4x points at US restaurants; 4x points at US supermarkets on up to $25,000 per year in purchases (then 1x points)
$250
35,000 bonus Membership Rewards® Points when you spend $2,000 in the first 3 months Rates & fees
50,000 points after spending $10,000 and 25,000 points after spending an additional $10,000 in the first 3 months
5x points on flights and prepaid hotels through Amex Travel, 1.5x points if you spend $5,000 on a single eligible purchase on up to 1 million additional points per year and 1x points on all other purchases
$595
Earn 50,000 points after spending $10,000 and an extra 25,000 points after spending an additional $10,000 on purchases in the first 3 months from account opening. Rates & fees
35,000 points after spending $5,000 on purchases within the first 3 months
4x points on two categories on up to $150,000 in combined purchases annually, then 1x points after that and on all other purchases
$295
Earn 35,000 Membership Rewards® points after you spend $5,000 on eligible purchases with the Business Gold Card within the first 3 months of card membership. Rates & fees
5,000 points after your first purchase on the card within the first year
2x points on purchases through Amex Travel and 1x points on all other purchases
$0 intro annual fee for the first year ($95 thereafter)
Earn 5,000 Membership Rewards® points after your first purchase on the card within the first year of card membership. Rates & fees
Up to $25,000 worth of credits for business services like Amazon Web Services, Salesforce, Zendesk and more
7x points on rideshares, 4x points on travel booked through Brex Travel, 3x points at restaurants, 2x points on software subscriptions and 1x points on all other purchases
$0
The first corporate card for startups. No personal liability or security deposit needed, meaning your personal credit score won't be affected.
N/A
N/A
$0
60-day interest-free financing for e-commerce businesses.

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How charge cards work

A charge card is slightly different from a credit card, but don’t be intimidated. You can use one just like you use any other card — simply swipe or insert your card, if it includes a chip.

When your bill arrives, you have one choice: Pay the whole thing. A charge card can be convenient in that sense, because it forces you to clear your slate each month. It also means that you won’t pay interest on your charges.

There are exceptions, however. If you qualify, American Express will let you carry a balance on your charge card through Pay Over Time. Pay Over Time can be applied to purchases of $100 or more and eligible travel charges. If you apply for this option, you’ll be the proud owner of a rare charge–credit hybrid card.

Credit limits vs. preset spending limits

When you’re approved for a credit card, your approval will include a credit limit — that is, an amount over which you can’t spend. A charge card, meanwhile, will likely advertise “no preset spending limit.”

charge card 3
“No preset spending limit” means that your card doesn’t allot a specific credit limit. It doesn’t mean that you can spend as much as you want. Instead, your card provider will set a spending limit based on factors like your income and previous spending levels.

With a credit card, you’ll know what your credit limit is. With a charge card, you might not know this amount. You could unwittingly exceed your spending limit, at which point your card would be declined when you attempt to make another purchase.

To avoid hitting your spending limit, contact your card provider to confirm what your limit is. Alternatively, slowly test the boundaries of your spending limit: Spend a little at first, and notify your card issuer or if you plan on making purchases that may put you over your limit.

As a rule of thumb, assume your limit is two to three times your average balance over the last few months.

Why use charge cards?

Credit cards have a few advantages over charge cards. But you may find a charge card worth picking up for a few key benefits.

  • It builds in automatic debt prevention. People can get in trouble with credit cards when interest sneaks up on them. This situation is less likely with a charge card, because you must pay your balance in full each month.
  • No preset spending limit. Unlike a static credit limit, your spending limit can vary. This means that you can ask your card provider to approve purchases that go over your spending limit. And of course, you can request an increase in your spending limit.

Forgetting to pay can cost you

If you rack up a big balance on a typical credit card and you’re not prepared to pay it off, you can make the minimum payment. But that’s not an option with a charge card — it’s all or nothing.

That said, watch your balance carefully if you’re using a charge card. If you can’t pay when your bill is due, you’ll be hit with painful late fees.

For American Express, you’ll be charged $27 if you pay late the first time. If you pay late again within the next six billing periods, you’ll be charged a $38 fee. And if you miss two consecutive billing periods, you may have to pay 2.99% of the amount you owe. Your credit score may also take a hit if you pay late, which could lead to longer-term financial trouble.

Keep your balances in check and keep track of your due dates, and it’ll be smooth sailing with your charge card.

Will a charge card affect my credit score?

Your credit score will dip slightly when you apply for a charge card. But this isn’t any different from the dip you’d see when applying for a credit card.

When considering your application, your card provider will initiate a hard pull on your credit report. This means they’re checking your credit history to decide whether to take you on as a cardholder. A hard pull causes your credit score to drop a few points, but you’ll soon recover those points with timely card payments. Your credit score may drop a bit further overall, because getting a new card lowers your average account age. Again, this drop is typical for all credit cards.

Do charge cards affect credit utilization?

If you have credit cards, you’ll know what your credit limits are. Then it’s easy to calculate your credit utilization. It’s a different story with charge cards, because they don’t have credit limits.

Without a credit limit to work with, some card providers may report the highest balance you’ve had on your charge card within a certain amount of time. This could serve as your card’s effective credit limit.

For example, say you typically spend a few hundred dollars a month on your card. If your highest balance is $500, your credit utilization may look high if your card provider reports that as your credit limit. But if your highest balance is $5,000, your credit utilization may seem low.

This doesn’t mean you have to start worrying about your highest balances. FICO, the go-to credit score provider, says they don’t use the “highest balance” model to calculate scores. So, your charge card won’t affect your credit utilization or credit score — at least where it matters.

Did you know?

Your credit utilization makes up about 30% of your credit score. That’s second only to your payment history, which makes up 35% of your credit score.

Charge cards vs. credit cards

  • Balances and interest. You can carry a balance on a credit card, paying interest for the privilege. You can’t carry a balance on a charge card, so you won’t pay any interest.
  • Credit and spending limits. Your credit card will have a credit limit. Your charge card doesn’t have preset spending limits — but like a credit card, you’re not entitled to unlimited spending.
  • Credit utilization ratio. Credit card spending will affect your credit utilization. Charge card spending won’t.
  • Costs. Charge cards tend to come with higher annual fees than credit cards. Late and returned fees are about the same for both card types.
  • Rewards. American Express charge cards come with travel benefits. But you’ll find many types of credit cards, from travel to cash back to secured and more.

Compare credit cards

If you’re not sure a charge card is right for you, consider a traditional credit card. Below are many options. Compare cards to find the one that best meets your needs.

Name Product Filter values Rewards Purchase APR Annual Fee
2x points on travel and dining. 1x points on all other purchases
18.24% to 25.24% variable
$95
Earn 60,000 bonus points after you spend $4,000 on purchases in the first 3 months.
7x points on Hilton Honors purchases, 5x at US restaurants, US supermarkets and US gas stations, 3x on all other purchases
17.99% to 26.99% variable
$0
Earn 75,000 Hilton Honors™ Bonus Points after you spend $1,000 in purchases on the card within your first 3 months of card membership. Rates & fees
5x points on flights booked directly or flights and hotels booked through American Express Travel. 1x points on all other purchases
None (Charge Card)
$550
Get 5x Membership Rewards® points on flights booked directly with airlines or with American Express Travel and 5x points on eligible hotels booked on amextravel.com. Rates & fees
N/A
14.24%, 20.24% or 25.24% variable
$0
An 15 months 0% intro APR period on both purchases and balance transfers, plus zero foreign transaction fees, makes this is a strong well-rounded card. See Rates and Fees
3% cash back on up to $10,000 in the first 12 months, then 1.5% on all purchases
15.24%, 19.24% or 25.24% variable
$0
Earn unlimited 1.5% cash rewards on purchases. See Rates and Fees.
2x miles at US restaurants and on purchases made directly with Delta and 1x miles on all other purchases
17.99% to 26.99% variable
$0
Earn 10,000 bonus miles after spending $500 in purchases on your new card in your first 3 months of card membership. Rates & fees
3% at US supermarkets on up to $6,000 per year, then 1%. 2% at US gas stations and select US department stores and 1% on all other purchases
15.24% to 26.24% variable
$0
Earn a $150 bonus statement credit after you spend $1,000 on purchases in the first 3 months. Rates & fees
3x points on airfare booked directly with airlines; 4x points at US restaurants; 4x points at US supermarkets on up to $25,000 per year in purchases (then 1x points)
See Rates & Fees
$250
35,000 bonus Membership Rewards® Points when you spend $2,000 in the first 3 months Rates & fees
6% at US supermarkets (on up to $6,000 annually, then 1%), 6% on select US streaming services, 3% on transit, at US gas stations and 1% on all other purchases
15.24% to 26.24% variable
$95
Earn $250 bonus cash back after you spend $1,000 on purchases in the first 3 months. Rates & fees
3% cash back on all purchases in your first year up to $20,000 spent, then unlimited 1.5% cash back on all purchases
17.24% to 25.99% variable
$0
Earn 3% cash back on all purchases in your first year up to $20,000 spent. After that earn unlimited 1.5% cash back on all purchases.

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