Charge Card vs. Credit Card

Small Business Owners Using Laptop In Restaurant

There’s a lot of confusion out there when it comes to charge cards and credit cards. What’s the difference between the two? And which one is right for you? Although on the surface they appear to be similar products, for some businesses there are key differences to note.

What is a charge card?

A charge card is a type of credit card that allows the cardholder to borrow money from the issuer up to a certain limit in order to purchase items or withdraw cash. They charge no interest on the requirement that the balance is paid off in full, usually monthly.

Typically, charge cards have a higher limit than credit cards. This can be helpful if you need to make a large purchase or if you want to avoid carrying a balance from to month. However, there is still an undisclosed limit to consider, calculated based on your credit and repayments, which can increase over time.

The user should always be aware of how much is going through their charge card to keep in mind the full balance repayment every month. If this is missed, there will be additional charges and consequences.

How do charge cards work?

Using a charge card seems no different to a credit card when making day-to-day payments. The main difference is the repayment style.

A charge card requires the full balance to be covered in full every month. Unlike charge cards, credit cards are known for their flexibility by allowing you to pay a portion of your statement balance, with a pre-agreed percentage charge.

Differences between charge cards and credit cards

Now you know what a charge card is, you might be questioning how else they differ from a credit card. While the key differences are the credit limit and repayment method, there are a few other ways to distinguish between them.

Spending limits

Credit cards will offer you a credit limit that you can not exceed. In the instance you do, some facilities add charges. Charge cards have no predetermined limit so you have more buying power.

Credit score

To be considered for a charge card, you usually need a strong credit score. However, even if you have a poorer score you may still be able to get a credit card. This means you can build towards a higher credit score whilst still accessing funding.

Repayment flexibility

With a charge card, you have to pay off your balance in full each month. Otherwise, you may be charged interest on your outstanding balance, which can add up quickly. Credit cards, on the other hand, offer the flexibility to pay a minimum payment and revolve the credit to the following billing period.


Charge cards generally charge no interest because the customer doesn’t carry a balance. With credit cards, if you don’t pay your whole balance, you will incur interest charges.

Annual fees

The majority of charge cards will come with an annual fee. For credit cards, while some may carry charges there are plenty of free cards too.

Similarities between charge cards and credit cards

While there are some important differences between charge cards and credit cards, there are also a few similarities. The most important for small businesses will be the rewards available to them and access to an interest-free period.

Appearance and function

Once you start using your card, there is minimal difference between the two cards in their look and how you use them.


Both cards have the opportunity to offer rewards such as cashback, travel perks and leisure experiences. Rewards are one of the most enticing benefits of a charge card. This usually comes with a fee for charge cards, but can be free with your credit card. For example, the Capital on Tap Business Credit Card, issued by WebBank, offers 1.5% cashback on card spend.

Interest-free period

Charge cards must be paid in full as part of the terms. However, you can still enjoy the same experience with a credit card by repaying your full outstanding balance on time. Lots of credit cards offer a grace period where you receive no charges for using the card.

Do charge cards build credit?

Charge cards can still improve your credit score (in the same way they can damage) as they have a repayment history that can record on-time, regular repayments. They can demonstrate responsible usage that will increase the longer you have the account open.

However, credit utilization is a factor many credit assessors use to determine a responsible spender. This is calculated as the percentage of the credit limit you use which becomes more difficult when there is no preset limit for charge cards. This can result in charge cards being excluded from credit reports for this factor.

Charge cards may also appear as a hard search on your credit report which can negatively affect your points, so it’s important to consider if your credit score can support a charge card application. During the application for a Capital on Tap Business Credit Card there will be no impact on your personal credit score.

How to choose between credit cards and charge cards

Every business is different, so choosing the right card for you is important.

Depending on how you use it, you can have a similar experience with a charge card vs a credit card in terms of earning rewards and having an interest-free payment solution.

If you are looking for a card with high buying power knowing you will repay in full, you may opt for a charge card.

However, a credit card may be preferred if you are looking for a free, rewarding card with repayment flexibility. This can be for cash flow in those tighter months, if your credit score may not support a charge card, or just to have the best of both worlds and maintain an interest-free account.

If you decide a credit card is the best option for your small business, make sure to consider applying for the Capital on Tap Business Credit Card. With unlimited free 1.5% cashback, unlimited company cards, and no annual or foreign exchange fees, it’s custom made for small businesses.

Frequently Asked Questions

Is a charge card the same as a credit card?

There are many similarities in the form of appearance, function, rewards and the opportunity for an interest-free card. However, the key difference comes in the form of charge cards requiring the balance to be paid off in full each month and the lack of a predetermined limit. 

Is a charge card better than a credit card for credit score?

A credit card allows you to borrow money against your credit limit, and the monthly payments are reported to the credit bureaus. However, if you miss a payment or carry a balance on your credit card, it can actually damage your credit score. A charge card, on the other hand, does not allow you to carry a balance. You must pay your balance in full each month, and there is no interest charged on the outstanding balance.

However, a credit card can allow you to demonstrate responsible credit utilization, which charge cards are unable to do, due to having no predetermined limit. So both can positively (and negatively) impact your credit score and the better option for you should be assessed against your own business.

© Copyright 2022. Capital on Tap Business Credit Cards are issued by WebBank. © 2022 New Wave Card LP dba Capital on Tap.

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