The 3 major differences between credit cards and charge cards

  1. There is no defined spending cap on charge cards.
    A credit limit, or the maximum amount you are permitted to spend, is given to you when you acquire a credit card. The card might not be accepted if your credit limit is reached. You can choose to be allowed to spend more than your credit limit with some issuers, but you might be assessed an over-limit fee each time you do.

Although charge cards typically don’t have a defined spending cap, the issuer may nonetheless place a cap on the amount you can charge. Your capacity to buy could shift.

2. You must make a complete monthly payment using a charge card.
With a charge card, you must pay the entire sum each month. In some circumstances, this might be a positive thing because it will make you more conscious of your spending and less likely to charge more than you can reasonably pay back.

With a credit card, you can “revolve” the remaining balance to the following month by making a minimum payment that is equal to a small portion of the card’s outstanding balance. The unpaid portion of the balance will typically incur interest, although this can make managing bills easier.

3. When using a credit card, you can avoid late payment costs by paying the minimum amount due.
You could be assessed a late payment fee if you don’t pay off the balance on a charge card in full. If you pay the minimum amount due on time, you can avoid incurring late fees from credit card issuers. The CARD Act limits the amount that can be charged for credit card late payments; in 2021, the cap is $29 for the first instance and $40 for subsequent instances.