american express india credit and charge cards work

How Credit Cards and Charge Cards work?

From hassle-free payment of your bills to your day to day shopping, Credit Cards have become a convenient mode of payment. But with convenience also came the choices. Often confused with Credit Cards, there are Charge Cards, which are a different payment option. To understand how to use a Credit Card and Charge Card wisely, it is important to know how Credit Cards work.

What is a Credit Card?


American Express Credit Cards offer you a line of credit , which can be used to pay to the merchants for the goods or services availed at the merchant. At the end of each month, you have the option of clearing the Minimum Due amount or pay in full. There is an interest component that becomes applicable on any unpaid due as on the Payment 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 based on your spending pattern, financials, credit record, and your 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 or no payment, a Late Payment Fee is applied to the account. 



What are the differences between Charge Cards and Credit Cards?


Having access to extra money instantly can be very handy. You can pay bills or make purchases without having to arrange for funds at that moment. This is how a Charge Card or Credit Card can increase your spending power. However, as mentioned, there is a difference in how Charge Cards and Credit Cards work.Charge Cards come without a ‘pre-set’ spending limit. The limit on your card is reviewed periodically and changes are based on your finances, payment history, and spending pattern. Credit Cards, on the other hand, are bound with a set credit limit. You are required to pay your Charge Card bill in full by the Payment Due Date. In case of Charge Cards you are charged a late fee on overdue account balance. In case of Credit Cards, you can however, choose to only pay the Minimum Due amount in case of a Credit card. You are
charged an interest fee on the remaining amount till you pay it back in full. 

Charge Cards vs. Credit Cards

Feature Credit Card Charge Card
Has a 'pre-set' credit limit Yes No
Is part payment allowed Yes No
Charges Interest Yes No
Annual fee Yes Yes
Influences your Credit Score Yes Yes
Charges Late Payment Fees Yes Yes

How Do Credit Cards Work?


To understand how Credit Cards work, let’s first understand what details a Credit Card carries.

  • A Credit Card contains:
  • A unique 15-digit Credit Card number
  • Name of the cardholder  
  • A logo representing the company that is providing the system to process payments on that Credit Card. It could be a Mastercard/VISA/American Express
  • A Chip (if it is Chip-enabled card)
  • The validity of the card (From and Valid till Date)

There are some details at the back of the card too:

  • A black magnetic strip (If it isn’t Chip-enabled)
  • American Express card have a 4 Digit verification code, this is on the front and is required for online transactions.
  • White space for yoursignature.

How to use your Credit Card for shopping in retail stores?


  1. Complete your purchase and move to the payment counter. The cashier will either swipe your card or insert it in the card machine. He will then ask you to punch in your PIN (Personal Identification Number) to authorise the transaction. If you carry a contactless card and your purchase is less than INR 2000, then your transaction can be initiated just by waving the card near the machine. In this case you will not be asked /require to enter your PIN.

  2. Next, the device will read the magnetic strip on the   back of your card or chip, (which contains information to identify the card) and sends the information to your issuing bank along with the PIN. Once all the details are verified, the bank approves the transaction.

  3. Upon approval, the machine prints two receipts - one for the retailer and the other for your records. The retailer gets the money from the bank after a few days.

  4. The bank bills you for all the transactions done in a billing month and sends you a monthly Card statement. You are expected to pay the full amount or at least the Minimum Due by the Payment Due Date mentioned in your Card statement. Any pending amount is billed with interest in the next month’s Card statement.


How to use your Credit Card Online?

  1. First, add your desired items in the cart and proceed to pay.

  2. Then, select the mode of payment as Credit Card.

  3. Next, you will be provided with an option to choose from whether   your Card is VISA, Mastercard or AMEX. Select the right option.

  4. Enter your 15-digit Card number.

  5. Enter the name of the cardholder.

  6. Enter the expiry date of the Card and the CVV (American Express card have a 4 Digit verification code, this is on the front and is required for online transactions)

  7. Once you enter all these details and proceed, the payment gateway sends all the information to the bank. The bank sends an OTP to your registered phone and/or e-mail. Enter that OTP, and if it is correct, the bank approves the transaction.

  8.  Your transaction is complete. Finally, you will get a message on your registered phone about the transaction details on your Card.




How Do Charge Cards Work?


A Charge Card works like a Credit Card without the option of making part payment when the Charge Card statement comes. There is ‘no pre-set limit’ on the credit allowed, and it can be used to make purchases, pay bills and earn rewards too. Most Charge Cards need you to pay your full balance in time and if you are unable to do so for some reason, they may suspend your account until you make full payment. There are, however, some Charge Cards that do allow some part of the balance to be carried over.



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 the interest component in your statement amount. All types of Credit Cards charge interest rates. Interest is payable at the monthly percentage rate on all Charges from the date the Cardmember incurs the transaction until they are fully repaid, except where an interest free period applies. 

Interest, if payable, is calculated by multiplying:

  • The daily balance of Charges on which interest is payable; by
  • The daily percentage rate (monthly rate multiplied by twelve divided by 365); and then
  • Adding up the daily interest Charges for the applicable period.

Please Refer MITC for More Details



Credit Card Balance



Overdue balances accrue interest every 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.



What is the Limit on Your Credit Card?

Credit Cards come with spending limits. These limits are decided based on your credit rating. Card issuers use this to determine your limit on the 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 greater flexibility in spending with 'no pre-set' limit. This means that your charges are approved based on your spending pattern, financials, credit record and account history. Please note that ‘no pre-set limit’ does not mean your spending is unlimited. If you anticipate making an exceptionally large purchase, please call us in advance.



Credit Card Fees and Charges

American Express® Credit Cards charge an annual fee in return for rewards, features and benefits. All American Express cards have annual fee. The amount will vary depending on the Credit Card you apply for. Typically, the more rewards or features your Card has, the higher the annual fee. There are other standard Credit Card charges and fees  that may sometimes apply. All Credit Cards charge
interest on outstanding balances for purchases, balance transfers and cash advances.



Credit Card or Charge Card: Which is Better?


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. 

AMEX offers the best Card if you want to: 

  • Maintain a high Credit Score
    Apart from managing your money, it can also help you to improve your credit rating. The Charge Cards and Credit Cards are fantastic if you want to maintain a high credit rating.

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



Useful terms


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

What is Credit Limit


Earning Loyalty Points


Earn Air Miles


What is a Charge Card


What Card fees am I expected to pay


How to choose a type of Card

American Express® Benefits

american express india fraud and shopping protection


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

american express india world class customer service


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

american express india contactless payments


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.


Explore Our Credit Cards

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