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What’s the difference between a charge card and a credit card?

Torn between getting a credit card or a charge card? While these cards may look similar, they are two very different products that could have contrasting impacts on your financial situation.

A charge card is similar to a credit card in that debt is built up when goods and services are purchased. However, unlike a credit card it must be repaid in full each month. 

Read on to discover other differences between charge cards and credit cards. This information may help you make an informed decision about which card might be the best option given your own financial situation.

Debt and interest payments

Perhaps the main difference between a charge card and a credit card is their repayment schedules.

A charge card has to be paid back in full each month, with fees for late payment if the balance is not repaid. Debt cannot be accumulated, and therefore no interest is charged.

In contrast, a credit card allows a consumer to accumulate debt over a period of time. As long as cardholders make the minimum payment each month, they can benefit from the flexibility to pay back the balance at some point in future. The cost of keeping a balance from month to month is interest payments, which can be high for many credit cards.

Spending limits

Another key difference between charge cards and credit cards is their spending limits.

In theory, charge cards do not have spending limits. This can provide consumers with significant financial flexibility, allowing them to make large purchases in a short space of time (although, as discussed above, the balance must be paid in full each month).

In practice, though, charge cards do not have unlimited spending power. The issuer will inevitably consider the likelihood of a cardholder being able to repay the amount spent on a charge card, and may restrict their spending power should concerns arise.

A credit card comes with a set spending limit. Once this has been used up, a cardholder will need to repay their existing balance before being able to use the card again. This could help people to manage their spending and live within their means.

Annual fees

Charge cards normally have high annual fees. While some credit cards also have annual fees, they are generally not as high as those of charge cards, and it is possible to obtain a credit card with no annual fee. This makes credit cards more accessible to a wider range of consumers.


A wide variety of credit cards are available from a multitude of issuers. For example, there are rewards cards that help consumers to maximise the benefits of their spending in the form of cashback or vouchers. Similarly, balance transfer cards could help consumers to reduce interest payments on existing debt, while travel cards may cut the cost of spending while abroad.

In contrast, only a limited number of charge cards are available. Many of them are issued by American Express, which has the largest range of charge cards in the UK at the time of writing. This means there is less overall choice for consumers, who may find it more challenging to find a charge card that fits their own requirements and personal circumstances.

Which one is best for you?

For most people, obtaining a credit card could prove to be more worthwhile than having a charge card. The cardholder has the opportunity to repay a credit card in full each month, but also has the financial flexibility to pay a balance off at a later date. With a lack of annual fee in many cases, and a wide choice of options, it may be easier to find a credit card that fits your particular needs.

Charge cards, of course, could be appealing to consumers who want to benefit from the prospect of having no pre-agreed spending limit, but who know they will be able to repay the balance each month.

Either way, taking the time to consider your requirements before obtaining either type of card could allow you to find the charge card or credit card that works best for you.

Ready to find your perfect credit card? Check out our top credit card picks right now

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