What’s the difference between a charge card and a credit card?

Oct 31, 2019

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Reader Questions are answered twice a week by TPG Senior Points & Miles Contributor Ethan Steinbe

When picking a new travel rewards credit card, most people will compare the welcome offer, bonus categories and other perks to decide which is right for them. Very rarely does the type of card come into play, but if you’re applying for an American Express card there’s one important thing to consider. TPG reader Lisa wants to know the difference between Amex charge cards and credit cards.

I’m looking at the updated Amex Green Card and it says that this card is a “charge card.” What exactly does that mean, and how is it different from a regular credit card?


Amex recently announced a refresh of the American Express® Green Card that includes a new welcome bonus (30,000 American Express Membership Rewards points after spending $2,000 on purchases in the first three months, new bonus categories (3x points worldwide on travel, restaurants and transit, including flights, hotels, campsites, tours, car rentals, ride shares, buses, subways, third-party travel websites and amextravel.com) and new perks (an up to $100 annual statement credit each for a CLEAR® membership and LoungeBuddy access).

Related: For the modern traveler: American Express Green Card review

However, the Amex Green Card is actually a hybrid card, where card members have no preset spending limit and can either pay in full each month or carry a balance with interest on eligible charges, up to the Pay Over Time limit. The amount the card member spends above their Pay Over Time limit is included in full in their amount due each month.

Amex issues both types of products, with other popular charge cards including the The Platinum Card® from American Express, The Business Platinum Card® from American Express, American Express® Gold Card and American Express® Business Gold Card. While credit cards come with fixed limits of how much you can spend at one time, charge cards don’t have any preset spending limit. Your transactions are approved on a case-by-case basis, which in practice means that Amex is extending you a much larger credit line. This is great for high-spending individuals and businesses: While it’s not easy to get approved for a single credit card with a $100,000 credit limit, many businesses are able to charge much more than this each month to their Business Platinum charge cards.

For the average customer this distinction isn’t all that important, but there are a few reasons to keep an eye on it. The first is that Amex unofficially limits the number of cards it will give you at any time to five credit cards (but charge cards don’t count toward the limit). If you’ve already used up your five credit card slots, applying for charge cards instead will help you keep earning valuable welcome bonuses.

The second issue has to do with how your credit score is calculated. Your utilization ratio (total outstanding balances divided by total available credit) accounts for 30% of your FICO score. Since charge cards don’t have a credit limit, there’s no denominator to that equation and it’s impossible to calculate a utilization ratio. This means if you have a large purchase like a medical bill or car repairs, putting it on a charge card won’t adversely affect your credit score. The balance will still be reported to the credit bureaus, but it won’t be included when calculating your utilization ratio.

Bottom line

If you have a an Amex Gold, Amex Green or Platinum, you already have a charge card. Amex doesn’t issue these products as credit cards, and you don’t need to do anything differently when applying to receive a charge card. Just remember that not having a credit limit isn’t a good excuse to spend irresponsibly and rack up debt. If you start carrying a balance on your credit cards from month to month, your interest payments will quickly erase the value of any rewards you may have earned.

Thanks for the question, Lisa, and if you’re a TPG reader who’d like us to answer a question of your own, tweet us at @thepointsguy, message us on Facebook or email us at info@thepointsguy.com.

Featured photo by Wyatt Smith/The Points Guy.

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