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In this article:Charge cards can help you build credit and earn rewards just like traditional credit cards, but you must pay your charge card balance in full each month—otherwise, you'll pay a fee. When using a traditional credit card, you're able to carry over a portion of your balance as long as you make the minimum payment each month as set by your credit card issuer.
Instead, the issuer can set your spending power based on your purchase behavior and payment history, and your charge card can be declined if a purchase exceeds it. Read on to learn more about the differences between charge cards and credit cards so you can decide which option is best for you.
But there are several major differences between the card types:: Charge cards require you to pay your full balance each month. If you don't, you'll be subject to late fees and interest charges. Traditional credit cards also charge interest if you carry a balance, but you'll only have to pay a late fee if you make your payment after the due date (The Difference Between Credit Cards and Charge Cards ...).
The Centurion® Card from American Express is one of the few remaining "true" charge cards, and its qualification requirements are extremely strict. Charge cards for gas purchases are also available. In contrast, a wide range of issuers offer traditional credit cards, and there is more variety in the types of rewards, cash back and fee structures available.: American Express says their cards are accepted as a payment option at 99% of vendors that accept credit cards in the U.S.
Gas station charge cards may only be accepted at co-branded fueling locations or at gas stations within the card issuer's network.: Since you're expected to pay off your balance each month, charge cards don't accrue interest charges or fees if you use them as designed. Pros and Cons of Charge Cards, Charge cards aren't as common as credit cards, but they have some unique benefits that make them worth looking into.
Charge cards add an extra motivation to use credit responsibly by charging both interest and a late fee if you carry a balance.: If you use charge cards the way they're meant to be used, you'll get the flexibility of paying with credit without the drawbacks of carrying debt.: Charge cards don't give you a specified credit limit when you're approved, though you won't be able to spend an unlimited amount. What's The Difference Between Credit & Debit Transactions?.
That way you can use your charge card without worrying that your transaction will be declined. Charge cards have drawbacks, too, including:: There might be times when you would prefer to pay off a big purchase in installments. Carrying a balance can be more expensive on a charge card for the reasons listed above.: Since you'll need to pay off your entire balance monthly, it's imperative that charge card users take note of their spending and ensure they can pay their full bill when it comes due.
Many traditional credit cards don't have annual fees. Charge cards, however, typically do charge annual fees. Their rewards can be stellar, but you'll need to make sure that you use the card enough to rationalize paying the fee. How Do Charge Cards Affect Your Credit Score? Traditional credit cards are a type of revolving credit, which means you receive a credit limit and can "revolve"—or carry over—your balance from month to month.
If you use up a substantial portion of your credit limit, your score can be negatively affected. Charge cards, on the other hand, don't have credit limits, and the most recent FICO® Scores☉ won't count your charge card balance toward your credit utilization. Older FICO® Score models and Vantage, Score® calculations may include charge card balances in credit score calculations, however.