The Differences Between a Credit Card and a Charge Card

Choosing which card is right for you, a charge card or a credit card. Compare the best credit cards in NZ.

What is a credit card?

A credit card allows consumers and businesses to make purchases on credit, which they pay back at a later date. Depending on the age of the credit card balance, the user will often make interest payments on the amount of credit used.

What is a charge card?

When you make a purchase with a charge card, the amount is ‘charged’ to your account, which you then pay in full at the end of the month. Unlike a credit card, there is no option to roll the balance over, so the full amount needs to be paid to clear the balance to zero.

How charge cards differ from credit cards

Here are the three major differences between credit cards and charge cards.

No pre-set spending limit

When you apply for a credit card, you are approved based on a credit limit. For example, if your credit limit is $20,000, you can only spend up to that limit. Charge cards do not have a credit limit or pre-set spending limit. However, this does not mean you are free to spend as much as you’d like. Your purchases will be approved based on some different factors. These factors include your spending habits, payment history, credit records, and other risk factors determined by the card provider. You can use charge cards everywhere credit cards are accepted, so they are a convenient way to make payments while earning points.

No debt

Charge cards are paid in full each month which means you do not carry debt over to the next month like you can with a credit card. No debt means no interest payments, however, whether this difference is a benefit or a disadvantage will depend on your cash flow needs. If you’re carrying your balance over to the next month regularly on a credit card, ensure you know what your annual percentage rate (APR) is. If your credit card has a high interest rate you may end up having to pay a high amount of interest.

No interest payments

Unlike credit cards, charge cards do not incur interest expenses. This is because the balance is paid in full each month rather than being rolled over with interest like credit cards. It’s important to note, if you are late repaying the balance, you will be charged a fee.

Benefits of charge cards

In addition to being a convenient payment method and access to cash flow, a charge card has other benefits.

Earn reward points

Like credit cards, purchases on charge cards build your rewards points that can be used for purchases, travel or exchanged for gift cards. The American Express Platinum Card® comes with additional perks like complimentary insurance, credit for dining and travel, and even a personal concierge service! Charge cards have no pre-set spending limit, so you can earn points faster as you spend.

Pay no interest on purchases

With the balance paid down every month, a charge card does not incur interest. So you won’t ever have to worry about paying interest payments.

Greater purchasing power

Because there is no pre-set spending limit, your access to cash flow is more flexible than with a credit card.

Credit card vs charge card

To highlight the differences and similarities between charge cards and credit cards, we’ve compared the main features in the table below

Charge Card Credit Card
Pre-set Spending Limit No Yes
Full Payment is Required Each Month Yes No
Interest Charged on Balance No Yes (some cards have interest free terms)
Late Payment Fees Yes Yes
Annual Fee Generally yes Generally yes


If you’re searching for the best credit card or charge card for your needs, compare your options before deciding which one is right.

Compare Charge Cards and Credit Cards

If you pay off your card in full each month and want to earn rewards from your spending, a charge card might be right for you.