nigel woollsey

Nigel Woollsey

Online Writer
Published: 03/12/2019

At a glance

  • Charge cards and credit cards are often wrongly thought to be the same thing.
  • The balance on charge cards must be cleared in full by the payment due date every month. There is no revolving credit as with credit cards.
  • Charge cards are much less common than credit cards and require an excellent credit rating.
  • Some charge cards have no pre-set spending limit.

An area where many people get confused is the subject of charge cards and credit cards. Many people mistakenly believe that they are the same thing… so, what is a charge card and how does it differ from a credit card? Are they better for people with bad credit? What are the benefits and disadvantages of using a credit card? We answer your questions below.

What is a charge card?

Charge cards work very much the same as credit cards at the point of sale – instead of cash the buyer presents the charge card and the purchase is ‘charged’ against the holder’s account. However, you will need to have an excellent credit rating to obtain one and you must pay the full balance every month.

Charge cards can trace their history back to 1950 in America. Originating with Diners Club, these were the first cards that allowed users to buy with credit from a range of retailers rather than a single store or business. Credit cards followed a little later in 1958.

How is a charge card different to a credit card?

Charge cards and credit cards differ in two fundamental ways. Whatever you have spent on a charge card you must clear in full by the due date on your statement, unlike credit cards that allow for ‘revolving’ credit – the ability to roll what you owe over the next month if you pay the minimum sum required.

In addition, unlike credit cards, charge cards don’t charge interest on your outstanding balance, instead requiring cardholders to pay off the whole sum each month. However, there are steep penalties for those who do not clear their balance on time.

Why would I choose a charge card over a credit card?

The fact that you are not allowed to rack up debt with a charge card may remove the temptation to make purchases that you are unable to pay for by a very strict time limit.

However, they do not offer any kind of credit other than deferring payment – meaning that they are no good for those who wish to spread the cost of their purchases over more than a single month.

In addition, some charge cards have absolutely no credit limit – meaning you could theoretically spend a vast amount on it if you could clear the total each month.

Is it easier to get a charge card?

Paradoxically, it is harder in practice to obtain a charge card these days. This can be down to the fact that some have no pre-set spending limit – allowing the holder to go on some truly epic spending sprees! Individuals with charge cards tend to therefore be high net worth customers who will have no problem paying off the balance at the end of the month.

Obtaining a charge card requires an excellent credit score. To find out what your credit score is, why not get your free ClearScore Credit Report.

Another area where charge cards are more common is for business use. Here a company may issue authorised personnel with charge cards for business-related spending. This is then paid off in full by the company or by the employee after claiming the balance back through expenses.

Who offers charge cards?

These days charge cards are relatively rare, with only American Express as the last remaining major issuer. Credit card choice is however far larger, with a huge range of benefits, rewards and credit levels on offer.

To see the best deals currently available, go straight to our credit card comparison tables.

Pros and cons of charge cards

  • No charges if the balance is cleared completely at the end of each month.
  • Some have no pre-set credit limit – giving holders the ability to buy anything from a round of drinks to an around the world luxury cruise, without pre-approval.
  • No ‘revolving’ credit means your balance must be settled in full every month.
  • Penalties for failing to clear your balance.
  • Little choice of cards. 
  • High annual fees.
  • Only available to those with excellent credit scores.

Moneyfacts tip:

Moneyfacts tip nigel woollsey

So long as you pay off the whole amount owing by the payment due date then there is nothing much to choose between a credit card and a charge card. Indeed, unless you need unlimited spending power, credit cards are arguably the better choice in terms of the number of options available and cheaper annual fees.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

close up of numbers on bank card

At a glance

  • Charge cards and credit cards are often wrongly thought to be the same thing.
  • The balance on charge cards must be cleared in full by the payment due date every month. There is no revolving credit as with credit cards.
  • Charge cards are much less common than credit cards and require an excellent credit rating.
  • Some charge cards have no pre-set spending limit.

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