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Credit Cards vs Charge Cards

In common parlance, we often come across terms such as Credit Cards and Charge Cards being used interchangeably, however, they are two very different things. The difference lies in the payment protocols for both. While both Credit cards and Charge cards offer a user a certain time period within which they can make the payments. In a Credit Card transaction, the user is provided with an option for minimum payment, while in a Charge Card transaction, the user is expected to pay the amount in full by the specified due date.

Let's examine the differences to understand which would be better.

How Charge Cards and Credit Cards are different?

Debit Cards, one of the most preferred options, work on the simple theory of spend as much as one has in their account, unless at times when you need to access extra cash instantly. Since most of us need the extra cash flowing in before the money actually arrives in the account, this is where the role of Credit Card and Charge Card comes to the forefront.

Our spending power can be improved by a Charge Card or a Credit Card.

Upon applying for an American Express Credit Card, one is asked to furnish details of KYC and income. This information is used, combined with Credit score, to ascertain suitability for a particular Credit Card.

What is a Credit Card?

Credit Cards let one build a "line of credit" in which the provider lends money to the user. This credit facility allows a user to make an expenditure up to an agreed credit limit and based on the balance, the user is charged interest at the end of every month.

When one borrows through a Credit Card, as per the contract one is obliged to pay back the balance amount with interest charges.

What is a Charge Card?

Charge Cards require a user to make the payment in full. If one defaults, a penalty fee is applied to the users Card account.

Though it may sound similar to a Credit Card but Charge Cards do not have interest rates. Their mechanism is based on your payment behaviour, spending patterns, and automatically keep adjusting your spending level. These are cards through which lenders offer membership rewards and exclusive benefits.

Both cards allow delayed payments and both place you in an agreement to repay. However, they are still different in a number of ways, which are as follows:

1. Interest rates

All Credit Cards charge an interest (Calculated as APR-Annual Percentage Rate) which is determined by the type of card and your CIBIL credit score.

On the contrary, in Charge Cards balance does not get carried forward month-on-month hence no interest rates are applicable. Since there is no actual credit offered, so there's no interest.

However, whether you hold a Credit or Charge Card, it is advisable to pay off the balance before it becomes due and completely avoid paying interest or charges.

Find out more about American Express Interest Rates

2. Credit limits

Credit Cards come with spending limits. These limits are offered based on your credit rating. This is used by Card issuers as a yardstick to decide your suitability for a Credit Card. As you begin using the Credit Card, your credit score keeps improving with every spend, thus enabling you to get a higher credit limit.

Charge Cards come with no credit limits. They instead have steep penalty fees which encourages you to pay the balance amount in full each month. You can enjoy unlimited credit without charges if the balance is paid in full each month. Like Credit Cards, Charge Cards also help in increasing your credit score, if used responsibly.

Find out more about your credit score

3. Card balances

On Credit Cards, interest rates are applied depending on the uses of a card. For example - cash advances, balance transfer and payments for goods and services. The interest rate gets added to a Card’s outstanding balance.

On Charge Cards, the outstanding balance is paid from the bank account. Many people choose to pay Credit Card balances by direct debit so as to avoid levying of interest charges.

4. Card charges

American Express Credit Cards may or may not charge annual fees, but all Cards charge interest on balance transfers, cash advances and outstanding balances.

American Express Charge Cards offer a range of member benefits for an annual fee.

Charge or Credit Card: Which is better for me?

Both Charge and Credit Cards have their unique advantages. To decide which is better, one should carefully evaluate their spending behaviour. Always consider which Card benefits interest you the most.

American Express is a leading provider of Credit Cards and Charge Cards worldwide.

We offer the best Card if you want to:

Find out about our best Charge Card on offer

  • Maintain a high credit score-we can help you to improve your credit rating. Our Charge and Credit Cards are ideal if you want to maintain a high credit rating.

Find out about our best rewards Credit Card on offer

  • Earn rewards for shopping-Our Membership Rewards Card offer you rewards for shopping which can be exchanged for booking flights, hotels and a variety of other incredible rewards.

Find out about our best travel rewards Card on offer

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