What is the Difference Between a Charge Card and Credit Card?

difference between credit cards and charge cards

Are Credit Cards and Charge Cards the same?

No, charge cards and credit cards are not the same. Unlike debit cards, credit cards and charge cards have one thing in common. Both charge cards and credit cards report payment history to the three major credit reporting agencies Experian, Equifax, and TransUnion.

Charge cards and credit cards differ in one major way. The balance on a charge card must be paid in full every month. If you miss full payments, you will be charged a fee, and a negative mark will be posted on your credit history. Be careful if you have only a few delinquencies your charge card can be canceled. Say for example if you have a one thousand dollar balance and pay 500.00 dollars off your bill it in a sense will be treated as if no payment was made. If you experience payment problems, it is important to contact the charge card company and notify them of your difficulties. If you don’t you run the risk of your account being canceled and there is only a small chance of having your account restored. Normally there is an annual fee associated with charge cards.

A credit card is a card where purchases can be made, and payments are deferred. Interest is charged if the balance is not paid in full. Credit cards can accumulate interest fast. Paying only the minimum payment is a payment almost entirely on the interest. It is recommended that credit card revolvers pay at the very least double the minimum payment. This strategy will help pay down balances faster.

Charge Cards vs Credit Cards – Which is Best?

Credit cards allow you the flexibility of carrying balances from month to month. Cardholders can run the risk of compounding balances with high interest.

Charge cards require complete payment on the balance every month. This can be too rigid for some. Others prefer charge cards because by paying the entire balance each month they do not need to be concerned with compounding interest.

Ultimately there is no best credit answer. Your needs determine the best type of card. Both types of credit offers have pros and cons.

A charge card is not the best option for people who may charge too much and will have difficulties paying their full balance each month. Charge cards can help some from racking thousands of dollars in credit card bills. For a charge card, you need to have discipline and the ability to pay each month. If this card is right for you, then you will find this type of a credit product helpful in keeping your finances in check. Also, a charge card is reported differently than your credit cards, auto loans, and home loan on your credit report. Having a charge card shows diversity on your credit file. On time payments with your charge card can help bolster your FICO score even more.

A credit card can often be the best option for people who can’t pay entire balances each month. Credit cards provide flexibility with payment options. Sometimes credit cards will offer 0 payment options for a period. To keep credit card balances low it is recommended to pay as much as possible each month to avoid high-interest charges.

Monica Kowollik

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