Charge Cards vs Credit Cards: What's the Difference?



From hassle-free payment of your bills to your day to day shopping, credit and charge cards have become a convenient mode of payment. However, there is a difference between how both the cards work. Knowing about that difference will help properly plan your purchases and spending needs.

What is a Credit Card? 


A Credit Card lets you pay for your purchases without cash. Credit Cards offer a line of credit or loan that allows you to make purchases and pay back the amount later. If you fail to pay the balance due in full, you’re charged an interest on the amount owed.


What is a Charge Card? 


A Charge Card works like a Credit Card, but without offering the option of making part payment. You are required to pay your charge card bill in full by the due date. Charge Cards offer a 'no pre-set' spending limit. A 'no pre-set' limit means that your charges are approved based on your spending pattern, financials, credit record, and your account history.


How to use a Credit Card or Charge Card? 


When it comes to using Credit or Charge Cards, they work the same for the end-user. Below are two scenarios of how one uses these cards- online and offline.


How to use your cards online?


  1.  When doing an online transaction, proceed to pay and select the mode of payment as a Credit Card and select your Card (E.g. American Express) for the payment

  2. Enter your 15-digit Card number, name of the cardholder, expiry date of the Card and the CVV (American Express cards have a 4-digit verification code)

  3. Once you enter all the above 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.

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


How to use your cards 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. 

  2. Punch in your PIN (Personal Identification Number) to authorise the transaction or initiate your transaction just by waving the card near the machine. 

  3. Next, the device will read the magnetic stripe on the back of your card or chip (which contains information to identify the card). Along with the pin, this information gets transmitted to your issuing bank. Once all the details are verified, the bank approves the transaction. 

  4. 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 in a few days.

  5. The bank bills you for all the transactions in a billing month and sends you a monthly Card statement. Upon receiving the statement, you pay the full or at least the Minimum Due amount. Any pending amount gets billed with interest in the following month's Card statement. You can keep track of your expenses and bills on an American Express App as well. 




Useful terms


Statement period

The period in which the reported transactions have taken place. Generally, your statement period will be every 30 days; the actual dates can vary slightly from month to month.



When you use your credit card, you are borrowing money from a lender, and interest is charged on the due amount unless you repay the full balance within a specified period. Interest is denoted as an Annual Percentage Rate (APR) or Monthly Percentage Rate (MPR).


Interest-free days

Interest-free days are the time from when you buy something using your credit card to when the interest starts getting added to that purchase balance – usually at the beginning of your next statement period.



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 Payment Due date – in which case you'll avoid paying interest. You can also make Minimum Due or a part payment, in which case you will need to pay interest on the pending balance in the next statement.


Closing balance

The amount you owe at the end of a particular statement period.


Credit Cards vs Charge 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

Charge Cards & Credit 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


What is Credit Card


Guide to CIBIL score


Credit card benefits