The term credit card is a very popular one, just about everybody has heard of that! But you may have heard the term charge card recently and have been left scratching your head. What’s the difference exactly?

Charge Card

Charge cards were actually the original form of credit cards. Instead of using cash or a check, you could use a charge card to pay for goods. The charge card is actually pretty similar to a credit card, however, the main difference is when it comes time to pay, you’ll have to pay the entire balance in full. Because the balance must be paid in full every month, they don’t really have a credit limit. Instead, they have what’s called a No Preset Spending Limit, or NPSL. 

There aren’t too many charge cards left out there, however the most common ones are the Membership Reward point earning cards from American Express such as the Platinum, Gold, or Green cards.

Credit Card

Credit cards on the other hand work a little bit differently. The cards come with a credit limit which is the maximum amount a card holder can charge at one time. The credit limit is determined by a number of factors including credit worthiness, income, and relationship with the bank itself. Additionally, when it comes time to pay, the balance does not have to be paid in full. However, there will be a minimum amount that needs to be paid every single month, typically to the tune of $35. Anytime a balance is left over, there will be interest charged on that remaining amount. 

Final Thoughts

The line between Charge card and Credit card is getting more and more jumbled with each coming day. While the original cards themselves were charge cards, it makes more sense from the banks point of view to offer credit cards, so they can collect on interest. Even American Express, who offers these charge cards, will allow you to pay a balance overtime; that basically makes it a credit card anyway.

While you can carry a balance on a credit card indefinitely so long as it’s under the credit limit, it’s in your best interest to treat your credit cards as if they were charge cards and pay them off every month. Not only would you be avoiding interest payments, but there are certain rewards you are earning for doing so. 

Do you have any charge cards? Which are you favorites and why? Let us know down in the comments below

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