The credit benefits of charge cards


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The charge card was pioneered by a businessman named Frank McNamara in 1950. A mishap, where he forgot his wallet while dining out led him to create what soon became the Diners Club Card. Over time, charge cards have mostly been replaced by credit cards. However, there are still benefits to carrying a charge card, including the rewards they offer.

Charge cards vs. credit cards

While both charge cards and credit cards allow you to make purchases against a line of credit, they operate very differently. For starters, a charge card does not allow you to carry a balance. The bill has to be paid in full each month. Any balances will incur late fees. A credit card, on the other hand, will allow you to carry a balance while paying a minimum amount each month.

Another big difference between the two is that a charge card does not have a preset credit limit. Instead, your credit limit is determined by your spending and payment habits, and can change from month to month. If your credit card purchases exceed your credit limit, you may have to deal with penalty fees or your card being declined.

There are not many companies that issue charge cards, and you can expect to pay an annual fee to maintain one. Credit cards are more ubiquitous. Some credit cards also come with an annual fee, but you can find many good options that do not.

Using charge cards to build credit

Building credit with a charge card is mainly done through your payment history, which makes up 35% of your FICO score. If you are paying off your charge card every month, you can expect to see a positive effect on your credit score. Charge cards can also build your score through your credit history – how long you keep an account open and how consistent you’ve been with payments. Maintaining a solid credit history with your accounts makes up 15% of your FICO score.

Best charge cards for rewards

Admittedly, charge cards are pretty hard to find these days. The only issuer that carries them is American Express, and you need a pretty good credit score to get one. You also have to be willing to pay a substantial annual fee. One of the lower annual fees is $150, which is what you’ll pay with the American Express® Green Card. You’ll earn 3X Membership Rewards points for every $1 spent on eligible travel, transit and dining purchases and 1 point per $1 spent on all other purchases.

The American Express® Gold Card has a higher fee of $250 a year, but offers more substantial rewards. You’ll get 4X Membership Rewards points at restaurants worldwide and at U.S. supermarkets for up to $25,000 in purchases annually, then 1X.. You’ll also earn 3X Membership Rewards points on flights booked directly with airlines or on Another travel perk is an up to $100 airline fee credit per calendar year. You can also earn up to $120 in dining credit when you make purchases on Boxed, Seamless or GrubHub with your Gold card (enrollment required).

The Platinum Card® from American Express is a charge card that’s issued by invitation only. If you have excellent credit and strong finances, you may end up with this card in your wallet. It comes with a hefty annual fee of $550, but offers some high tier travel rewards. You’ll get 5X Membership Rewards points on flights booked directly through the airlines or through American Express Travel.

You’ll get this same rate for prepaid hotels booked through You also get other perks like airport lounge access, free wi-fi access, TSA/customs reimbursement, Uber VIP status, baggage and airline fee credits, statement credit and many other travel perks.

All in all, the Amex Gold and Platinum cards offer excellent rewards and more flexibility to transfer rewards points.

Don’t see the card for you? Our CardMatch feature can help you find a card that best fits your needs.

Bottom line

There are credit cards on the market that will offer rewards for lower annual fees than a charge card, and some that have no fees at all. That said, a charge card will offer you more flexibility to make larger purchases because it has no preset credit limit and no added interest. If you are ready to earn high tier rewards without carrying a balance, a charge card is an option worth looking into.