Comparing Charge Card Offers
Updated: October 4, 2018
Charge cards aren't for everyone, but if you want superior rewards and you don't mind a higher annual fee, they can be a good choice. They are helpful if you sometimes need to buy big-ticket items or if you want to get organized with your cards. Curious about whether they are right for you? Here, we look at:
Learn more about these financial products below!
What is a charge card and how do they work?
A charge card, typically offered by American Express, allows you to be approved for large sums on the spot. The card issuer bases its decision on your past purchases and payments. While there's no set limit, it's not unlimited. The tradeoff is that you need to pay in full each month, whereas with a credit card, you can pay a minimum.
"The main advantage of a charge card is that you avoid interest fees because you're required to pay the balance in full at the end of every month," says Ted Rossman, who is CreditCards.com's industry analyst. "The main disadvantage of a charge card is that you don't have the flexibility to carry a balance from time to time. Paying the bill in full is an important goal for any credit cardholder, but it's an absolute necessity if you have a charge card."
If you aren't carrying a balance, the average debt per card is $1,154, according to creditcards.com. That means it is charged, but paid off each month. Compare that to $7,527 per card that usually carries a balance. That means that the debt on a card that doesn't carry a balance is typically considerably lower than a card with a balance.
Looking at how many people don't carry a balance – and might do well with a charge card – we've found that about 29% of accounts are paid in full each month, while accounts with a balance are almost 44%:
How many accounts get paid off each month...
- Accounts that carry a balance
- Accounts that pay off balance each month
- Dormant accounts
American Bankers Association survey
According to Bankrate, charge cards were once tied to rich rewards on spending and benefits that credit cards couldn't match. But in recent years, credit cards have aggressively explored the market, and there are now a number of premium credit cards with high-end features that rival those of the highest end charge cards.
While American Express is the primary network that provides charge cards, there are a few gas and retail charge cards still available. However, most of those are co-branded credit cards with a Visa, Mastercard or American Express logo, which means they are available where the network is used.
There is now an Amex feature that makes its charge cards more like credit cards called Pay Over Time. If you qualify, you can use the charge card as a charge/credit hybrid once you enroll, provided that the card is eligible. You select eligible charges of $100 or more and pay off those charges over time, but they will accrue interest as a credit card does.
Best charge cards
Here are the best charge cards – take a look at how they stack up against competing credit cards.
American Express® Gold Card
While the Gold Card's introductory bonus is half of that of its main competitor, the Chase Sapphire Preferred Card, it offers superior ongoing rewards, with 3X points on flights booked directly with airlines and 4X points at U.S. restaurants and U.S. supermarkets. There's also a $100 annual airline fee credit and a $120 dining credit (up to $10 per month) at select participating restaurants like Shake Shack and The Cheesecake Factory (terms apply). That said, the Sapphire Preferred's points earn a 25% bonus when used toward travel through Chase Ultimate Rewards.
Amex Gold Card vs. Chase Sapphire Preferred
|Card||American Express Gold Card||Chase Sapphire Preferred Card|
|Welcome bonus||25,000 pts / $2,000 spend in 3 mths||50,000 pts / $4,000 spend in 3 mths|
|Ongoing rewards||3X pts on eligible flights; 4X pts at U.S. restaurants & U.S. supermarkets||2X pts on worldwide travel, dining|
|Annual fee||$250||$95, waived first yr|
The Platinum Card from American Express
Although The Platinum Card from American Express has a higher annual fee than its primary competitor, the Chase Sapphire Reserve, there's up to a $200 annual credit on Uber rides and access to the Global Lounge Collection. There are also complimentary benefits with an average total value of $550 with Fine Hotels & Resorts. While the Platinum Card's introductory bonus is higher, though, the Sapphire Reserve points get a 50% boost when used to book travel through Chase Ultimate Rewards.
Amex Platinum vs. Chase Sapphire Reserve
|Card||The Platinum Card from American Express||Chase Sapphire Reserve|
|Sign-up bonus||60,000 pts / $5,000 spend in 3 mths||50,000 pts / $4,000 spend in 3 mths|
|Ongoing rewards||5X points on eligible flights, hotels; up to $200 on Uber rides annually||3X points on dining at restaurants & on travel after earning $300 annual travel credit|
Difference between credit cards and charge cards
While in some ways credit cards and charge cards are similar, such as both can help you build credit, in other ways they are quite different. Here, we look at how elements such as annual fees and interest work:
- Spending limit: While a charge card has no preset spending limit, that doesn't mean your spending is unlimited. Rather, your limit is tied to your past spending and payments, or how much the issuer feels you can afford.
- Interest: Because you pay in full each month on a charge card, no interest is charged.
- Late fee: Rather than charging interest, with a charge card, you can face a late fee that is usually a percentage of the past due late amount. For example, if you are late on a $10,000 charge card bill, says Bankrate, and the late payment penalty is 2.99%, you'll owe an additional $299.
- Annual fee: All charge cards have annual fees, although you may find one that waives the fee the first year. Many credit cards don't charge annual fees.
Here are key ways how charge cards and credit cards differ:
Differences between charge cards, credit cards...
|Charge card||Credit card|
|Pay in full each month||Can pay minimum each month|
|No specified limit||Has credit limit|
|Can be approved for large sums||Penalized for going over limit|
|Builds credit||Builds credit|
|Often with high annual fee||Can have no annual fee|
|Typically through Amex||Most major banks|
How do charge cards affect credit?
While the term "charge card" is sometimes used interchangeably with the term "credit card," the two are quite different in a number of ways, not least of which is how they impact your credit.
"As a charge card has no credit limit, they are typically bypassed in revolving utilization rate calculations in FICO scores," says Tom Quinn, FICO's vice president of scores. "Revolving utilization is the ratio of your revolving balances divided by your revolving credit limits. FICO research has found that the higher the ratio, the greater the risk the consumer poses to default on their credit obligations.
"However, other information on your charge card reported to the credit bureaus will be assessed a FICO score, which can impact the score," says Quinn. "Total and revolving balances owed are often considered in a FICO score and charge card balances can factor into these attributes. Your payment history on the charge card is considered as well as the length of time you’ve had the account – so making sure you pay your charge card balances as agreed is extremely important."
Advantages of charge cards
Charge cards have a host of advantages, including no preset spending limit and excellent rewards and benefits. Here are some very good reasons for getting a charge card:
- No preset spending limit. Likely the greatest advantage of a charge card is that there is no preset spending limit, which is perfect for a business owner who may need to make large purchases on the fly.
- Generous rewards and benefits. For example, the American Express Gold Card offers an annual $100 airline fee credit in addition to earning high rewards at U.S. restaurants, U.S. supermarkets, and flights booked directly with airlines. Then there are also benefits such as premium roadside assistance and a Global Assist Hotline.
- Encourages discipline. Because charge cards require you to pay in full by the due date, you can use the requirement as a way to discipline yourself not to carry a balance.
- Don't incur interest charges. Another advantage to paying in full each month is that you don't end up paying interest charges. Here's what you face if you carry a balance and pay the minimum payment with a non-charge card:
|Card||APR||Amount owed||Months paid||Interest costs||Total paid|
|Chase Sapphire Preferred® Card||17.24%||$3,000||127||$2,300||$5,300|
- Good for building credit. Charge cards are a great way to build credit because the good habit of on-time payments are actually the most important aspect of your FICO credit score.
- Your account is safer. Just as credit cards are protected by the Credit CARD Act of 2009, so too are charge cards. That means that while you may not be protected if a bad guy accesses your debit card, charge cards – and credit cards – have significant protections in place.
Pitfalls of charge cards
While charge cards have some definite advantages, there are a few reasons why they may not be right for you. You have to weigh the advantages with the downsides to these cards:
- Must pay in full by due date. If you have a likelihood of carrying a balance on your card, a charge card may not be the best choice. Instead, look for a credit card with a low interest or 0% intro offer on purchases.
- A missed bill can mean a sizable penalty. For example, with the Business Platinum Card from American Express Open, you can be charged $38 or 2.99%, whichever is greater, should you go past the due date. That means, if you go past the due date with a $10,000 balance, you can owe $299.
- Annual fee is often high. The annual fee can be high – for example, The Platinum Card from American Express has an annual fee of $550. Some, however, can have a waived fee the first year, such as $175 waived the first year on The Business Gold Rewards Card from American Express Open.
Who should use a charge card?
Business charge cards and credit cards each have their advantages, but in general, you'll want to review the rewards, compare the perks against the annual fee, check your monthly spend and total up your business cash flow. Charge cards are right for people who are organized and might need the convenience of no preset limit and superior benefits. Here are people who might benefit from having a charge card:
- A business person. The charge card is perfectly suited for a business person who periodically needs to make large purchases and a credit limit won't work. You can be approved in minutes right at the counter.
- Someone who can pay in full each month. If you can't pay in full each month, this is not the card for you. You'll want to be organized enough to be able to only put on the card what you can afford to pay back by the due date.
- A person with excellent credit. Charge cards are best for someone who has very good or excellent credit. That's because these cards typically require better credit.
- Someone who wants rich rewards. Charge cards often come with rich offerings, such as generous rewards for business expenses, say advertising and computer supplies from select vendors with The Business Gold Rewards from American Express Open.
- A person who doesn't mind a high annual fee. These cards typically have a high annual fee, but at the same time, their rewards can be pretty great, so it's a tradeoff. For example, The Platinum Card from American Express offers up to $200 in Uber rides annually and access to exclusive airport lounges through the Global Lounge Collection.
Laura is an editor and writer at CreditCards.com. She has written extensively on all things credit cards and works to bring you the most up-to-date analysis and advice. Laura's work has been cited in such publications as the New York Times and Associated Press. You can reach her by e-mail at email@example.com and on Twitter @creditcards_lm.
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