What are charge cards?

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

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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.

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

Name Product Welcome offer Rewards Annual fee Filter values
60,000 Membership Rewards® points after you use your new Card to make $5,000 in purchases in your first 3 months.
5x points on directly-booked flights or on flights and hotels on Amex Travel. 1x points on all other purchases
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 $4,000 in the first 3 months
3x points on directly-booked flights; 4x at restaurants; 4x at US supermarkets on up to $25,000 annually (then 1x points)
35,000 bonus Membership Rewards® Points when you spend $4,000 in the first 3 months. Rates & fees
50,000 points after spending $10,000 and 50,000 points after spending an additional $15,000 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
Earn 50,000 points after spending $10,000 and an extra 50,000 points after spending an additional $15,000 on purchases in the first 3 months from account opening. Rates & fees
Up to $500 back on FedEx shipments within the first 3 months, offer ends November 6, 2019
4x points on two categories on up to $150,000 combined annually, then 1x points after that and on all other purchases
Up to $500 back in the form of statement credits by purchasing qualifying services with FedEx using your American Express® Business Gold Card within the first 3 months, offer ends November 6, 2019. Rates & fees
3x points at U.S. restaurants and direct hotel and airfare purchases on up to $50,000 (then 1x), 2x points on purchases through Amex Travel and 1x points on all other purchases
Earn 3x points at U.S. restaurants and direct hotel and airfare purchases on up to $50,000 (then 1x), 2x points on purchases through Amex Travel and 1x points on all other purchases. Rates & fees

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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
1x points on all purchases with 2% point value when you redeem for airfare and 1.5% for cash back
16.74% variable
Receive an annual $100 air travel credit toward flight-related purchases including airline tickets, baggage fees, upgrades and more.
7x points on Hilton Honors purchases, 5x at US restaurants, US supermarkets and US gas stations, 3x on all other purchases
17.49% to 26.49% variable
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
1.5% cash back on all purchases
0% intro for the first 15 months (then 15.74%, 21.74% or 25.74% variable)
Earn unlimited 1.5% cash back on every purchase, every day.
6% on select US streaming services, 3% on transit and US gas stations, 6% at US supermarkets on up to $6,000 annually, then 1% after that and on all other purchases
0% intro for the first 12 months (then 14.74% to 25.74% variable)
Earn $250 bonus cash back after you spend $1,000 on purchases in the first 3 months. Rates & fees
CardMatch™ from creditcards.com
CardMatch™ from creditcards.com
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