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How Credit Cards and Charge Cards work

How Credit Cards and Charge Cards work

There are lots of different types of Cards. Though often confused, Credit Cards and Charge Cards are actually different payment options. This section will explain how to choose and how to use a Credit Card and a Charge Card.

What is a Credit Card?

American Express Credit Cards offers you a line of credit which can be used to pay to merchants for the goods or services availed at the merchant. At the end of each month you are charged interest on your balance. There is an interest component that becomes applicable on any unpaid outstanding as on the due date of the card statement.

What is a Charge Card?

American Express Charge Cards offer a 'no pre-set' spending limit. This means that your charges are approved basis your spending pattern, financials, credit record and account history. Please note that 'no pre-set limit' does not mean your spending is unlimited. Charge Cards require that the full balance of money spent on the card each month is paid. In case of a partial payment/ no payment, a Late Payment Fee is applied to the account.

What are the differences between Charge Cards and Credit Cards?

The simplest payment option, carried by most of us, is a Debit Card. A Debit Card uses the balance that actually exists in your account. You spend the money in your account with the option to have a small overdraft. If there isn't any money in your account, then your payments aren't made.

However, many of us now need to have access to extra money instantly. We sometimes need to pay bills or make a purchase before we have the money in our bank account. This is when our spending power can be increased by a Charge Card or a Credit Card.

Understanding Card interest rate

When you use your Credit Card, you are borrowing money from a lender. It is important to remember that if you don’t pay off your balance in full every month you will be charged interest until full repayment has been received. This interest is applied to your closing balance at the end of every day, and then totalled up to form interest on your statement amount.

All types of Credit Card charge interest rates. The interest rate (Calculated as APR – Annual Percentage Rate) is determined by the type of Credit Card you hold. Conversely, Charge Cards do not have interest rates as a balance cannot be carried forward from month to month. There is no actual credit offered – so you don’t have to pay interest.

The amount of interest you will be charged depends upon:

  • The interest rate of your Credit Card
  • The amount you spend
  • When you pay your Credit Card bill
  • The type of spend whether purchases or a cash withdrawal

Card Balances

Credit Card balances accrue interest each month. Different interest rates are applied for different uses of a Credit Card, for example balance transfers, cash advances and payments for goods and services. The interest rate is added to the outstanding balance on the Card.

With a Charge Card the outstanding Card balance is paid straight from your bank account. Many people choose to pay Credit Card balances by direct debit to avoid interest charges.

What is Credit Limit?

Credit Cards come with spending limits. These limits are decided based on your credit rating. Card issuers use this to determine your suitability for a Credit Card. As you continue to use your Credit Card, your credit score improves – making it easier to get a higher credit limit.

Charge Cards have no credit limits. Instead they have higher penalty fees which encourage you to pay the balance in full each month. Providing you pay the balance each month, you can enjoy unlimited credit without charges. Like Credit Cards, Charge Cards when used responsibly, help to increase your credit score.

Find out more about your credit limit
Card fees and charges

Some American Express® Cards charge an annual fee in return for rewards, features and benefits. American Express Credit Cards may or may not have annual fees. The amount will vary depending on the Card you apply for. Typically, the more rewards or features your Card has, the higher the annual fee. There are other standard charges and fees that may sometimes apply. All Credit Cards charge interest on outstanding balances for purchases, balance transfers and cash advances.

Who accepts American Express in India

More Merchants in the India are choosing to accept American Express. You can use your American Express® Card for purchases big and small, including the places you love to shop at every day. We are continuing to grow our network throughout India, ensuring when you want to use your Card, you can.

Charge or credit card: which is better for me?

Both Charge Cards and Credit Cards have their own distinct advantages. The way you plan to use it, largely determines which Card you choose. You should also consider which Card benefits appeal to 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:
  • Maintain a high credit score – Apart from managing your money, we can also help you to improve your credit rating. Our Charge and Credit Cards are fantastic if you want to maintain a high credit rating.
  • Earn rewards for shopping – Our Membership Rewards Card offer you rewards for shopping which can be exchanged for booking hotels, flights and a variety of other incredible rewards.
Learn more about our Rewards Cards

Useful terms

Useful Terms

  • Statement period: The period in which the transactions reported on your statement relate to. Generally, your statement period will be every 30 days, the actual dates can vary slightly from month to month.
  • Interest: When you use your Credit Card, you are borrowing money from a lender – and will be charged interest unless you repay the full balance within a specified period. Interest is usually expressed as an annual percentage rate, also known as the interest rate.
  • Interest free days: Interest free days are the time from when you buy something using your Credit Card to when interest is applied to that purchase balance – usually at the beginning of your next statement period.
  • Repayment: When your statement arrives, you will have a choice of repayment options. You can pay off the entire Credit Card bill on, or before, the statement due date – in which case you’ll avoid paying more interest.
  • Closing balance: The amount you owe at the end of a particular statement period.


Credit and Charge Cards Explained

Has talk of interest, annual fees, rates and percentages left you feeling confused?

Our simple Credit and Charge Card guides are a great place to start.

What is Card Interest

Learn More

What is Credit Limit

Learn More

Earning Loyalty Points

Learn More

Earn Air Miles

Learn More

What is a Charge Card

Learn More

What Card fees am I expected to pay

Learn More

How to choose a type of Card

Learn More

American Express Benefits


Your security and protection are our priority. Our technology has been designed to give you peace of mind when using your card

Learn More about Fraud Protection


Access to our customer service is available 24/7 by phone, text or email.

Learn More about Customer Service


Contactless is the quick, easy and secure way to make payments - Simply touch your American Express Card on the reader, wait for the beep and you're done. What's more, with Amex pay and Apple PayTM, you can even pay with your phone.

Learn more about Contactless Payments

Explore Our Credit Cards

American Express Offers a range of Credit Cards with different rewards and benefits tailored to your lifestyle and interests.