Open-ended credit cards and charge cards are both ways that you can pay in the future for a purchase you make today. Beyond this ability, credit cards and charge cards are very different in terms of their payment and credit policies. Similarities include the late fees associated with cards and the rewards programs they may offer.
Payment Cycle
Credit cards operate on a monthly payment cycle, and you must make at least minimum payment within a few weeks of receiving your monthly statement. If you do not pay off the entire amount on your card, the remaining balance will accrue interest charges per the terms of your credit agreement. If you do not make at least a minimum payment, you will usually be assessed a late fee. With a charge card, you are required to pay the full amount of your balance before the next payment cycle begins. Failure to do so will result in late fees and penalties, and may result in the revocation of your charge card if it happens repeatedly.
Spending Limit
Credit cards have a well-defined limit that is posted at the top of every statement you receive. Although the credit card company may occasionally raise or lower the credit limit, you are always apprised of what your limit is. Charge cards have no pre-set spending limit. Charge card companies approve or deny your purchases based on a proprietary formula of your past spending habits.
Interest Charges
As credit cards offer you the option to carry a balance on your card, you also have the option whether or not you will pay interest charges. Any month where your balance is above zero you will incur interest charges. The amount of the interest you will pay must be specified on your statement by law. Charge cards, on the other hand, do not have interest charges, as you cannot carry a balance beyond a month.
Rewards Programs
Charge cards such as the American Express card were the innovators in the rewards program market, offering card holders opportunities for preferred concert tickets, free hotel nights and other bonuses based on card membership. In order to remain competitive, everyday credit cards implemented their own rewards programs, and now many types of credit cards can earn points or rewards for card holders.
Fees
Both credit cards and charge cards come with various fees, in addition to possible interest or late payment fees. Some cards charge an annual fee just for having an account. Usually, the highest fees are attached to cards with the greatest card holder rewards or some sense of "status," such as platinum or gold cards.
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