When it comes to borrowing, most consumers are familiar with credit cards. However, there’s another equally valuable but often overlooked option- Charge Cards. While both credit cards and charge cards can be used for online and offline purchases, they differ significantly in how they operate.
In India, the charge card segment is extremely niche. While there are over 400 credit cards catering to diverse customer needs, only a handful of charge cards are available. Their limited presence and stringent eligibility criteria make them less visible in the market, even though they can deliver exceptional value to high-income, responsible spenders.
If you are eligible and want to add a charge card to your wallet, it’s essential to understand how they work and how they differ from credit cards.
What is a Charge Card?
Similar to credit cards, charge cards allows you to make both online and offline purchases. However, charge cards typically come with no preset spending limit, allowing cardholders to spend as much as they need. Instead of a fixed limit, transactions are approved or denied basis your spending habits and previous financial behaviour.
Unlike credit cards, charge cards require you to pay your entire outstanding balance in full every month; there is no option to carry forward unpaid balances to the next billing cycle. Charge cards usually come with more stringent eligibility criteria and are generally offered to individuals with a strong credit profile and high income. They are best suited for consumers who can afford to pay off their dues in full on a regular basis.
Charge Card Vs. Credit Card: At a Glance
| Feature | Charge Card | Credit Card |
| Bill Payments | Full payment is required every month | Minimum payment allowed; balance can roll over with interest |
| Credit Limit | No preset spending limit | Fixed credit limit |
| Late Payment Charges | High penalties for delayed payments | Interest charged on unpaid amount |
| Eligibility | More stringent, often for high-income users | Available for different income levels |
| Annual Fee | Generally high | Wide range – free to premium |
| Rewards & Benefits | Premium rewards, travel & lifestyle benefits | Varies by card type |
Charge Cards vs Credit Cards: Key Differences Explained
Here are a few key differences between charge cards and credit cards to help you better understand and make an informed decision:
1. Credit Limit
One of the major differences between charge cards and credit cards is the preset credit limit. Unlike credit cards, charge cards do not have a preset credit limit, which means you can spend as much as you want. However, the approval of transactions depends on your credit profile, payment history, and spending patterns as assessed by the card issuer.
On the other hand, credit cards come with a fixed credit limit assigned based on your creditworthiness. You can spend only up to that limit. With responsible usage, you can request a credit limit increase, but the approval is subject to your eligibility and the issuer’s internal policies.
Moreover, maxing out your credit limit frequently on credit cards is not advisable, as it can negatively impact your credit score. However, since charge cards have no preset limit, they do not impact your credit score in the same way. You can spend as much as you can afford to pay back in full each month.
2. Bill Payments
Unlike credit cards, charge cards do not offer the flexibility of paying only the minimum amount due and revolving the outstanding balance to the next month. While credit cards allow you to pay based on your financial capability, it is not advisable to pay only the minimum due every month, as interest is charged on both the outstanding balance and new purchases from day one.
With charge cards, you are required to pay the entire bill in full every month. Since charge cards do not allow partial payments, they typically do not charge an APR. However, if you default on the payment, a high late payment fee—usually higher than that of credit cards—is levied.
So, while credit cards offer the flexibility of partial payments, charge cards do not. However, with both cards, it is advisable to pay the bill in full every month to maintain a strong credit profile.
3. Eligibility Criteria
Credit cards cater to all types of individuals—whether new to credit or those with a strong credit profile—consumers can apply for entry-level to premium credit cards based on their eligibility. However, charge cards are usually designed for high-net-worth individuals and come with strict eligibility criteria, such as a high annual income. For instance, to apply for American Express Platinum Charge Card, you must have an annual income of at least Rs. 25 Lakh.
So, while it is easier to avail a credit card even if you are new to credit, charge cards do not offer this flexibility. You are required to have a strong credit profile along with a high annual income to be eligible for a charge card.
4. Annual Fee
Similar to the eligibility criteria, charge cards usually offer premium benefits and are designed for high-net-worth individuals, which is why they typically come with a high annual fee. On the other hand, the fees charged by credit cards vary from card to card. You can apply for a lifetime free card with no joining or annual fee or for a premium card with a high annual fee, depending on the card’s features and benefits.
Therefore, before applying for a charge card, you must ensure that you can maximize the overall value of the card by paying the high annual fee.
5. Rewards & Benefits
While charge cards usually come with a high annual fee, they justify it by offering premium benefits catering to luxury travel and lifestyle. On the other hand, since credit cards cater to a wide range of individuals, they offer benefits that range from basic to premium, depending on the card variant.
For instance, American Express Platinum Charge Card offers premium travel and lifestyle benefits such as discounts at luxury hotels, complimentary hotel memberships, access to VIP events, and more — justifying its high annual fee of Rs. 66,000. However, you can also avail similar benefits through premium credit cards like Axis Bank Reserve or IDFC FIRST Private. These cards also come with high annual fees but have a preset credit limit based on your eligibility.
What differentiates credit cards is the flexibility they offer — if you don’t want to pay a high annual fee and only want to avail basic benefits, you can opt for entry-level cards. This flexibility makes credit cards accessible to a broader segment of consumers.
Charge Card Vs. Credit Card: Which One to Choose?
The right choice between charge cards and credit cards depends on your spending habits and repayment capability. If you’re seeking premium benefits and can comfortably pay off your entire balance every month, a charge card might offer good value. Whereas, if you have a strong credit score, are comfortable spending within the preset credit limit, and want to earn rewards and premium benefits, a credit card is a more practical option.
Remember, the preset credit limit should not be the sole deciding factor. You should analyze your financial needs, compare the features, rewards, and fees of different cards, and choose the one that best aligns with your lifestyle and repayment capacity.
Both charge cards and credit cards have their unique advantages. Credit cards offer flexibility for bill payments, but partial payments come with high interest charges. On the other hand, charge cards typically require full payment every month. There is no rule as to which type of card is better — the choice depends on your spending preferences and repayment capacity.
