Debt Relief Canada – Charge cards vs. credit cards: What’s the difference?

Posted on July 29th, 2013 by admin | No Comments

You'll get charged a hefty percentage of the balance if you don't pay off your charge card in full at the end of the month.

American Express offers a line-up of rewards cards designed specifically for high spenders who pay off their balance in full each month.

Although they seem to be credit cards, they really aren’t. They are charge cards, which are something quite different because rather than having the option to make partial payments and carry a balance, charge cards must be paid off in full.

These cards don’t charge interest, but late payers face a stiff penalty of 30 per cent of the balance.

Another important distinction is that charge cards, unlike credit cards, don’t come with a pre-set spending limit. That doesn’t mean you’ll get unlimited spending power, but does provide the means for big spenders to put all their expenses on one card to help rack up rewards points.

Amex’s suite of charge cards includes the popular American Express Gold Rewards card, Platinum card and all three tiers of AeroplanPlus cards. They also carry a full line of charge cards for business owners. (Amex also has some credit cards, which allow you to carry a balance).

Related: Air Miles, Aeroplan top travel rewards cards

They’re aimed at two types of customers:

-The more affluent customer who has no real need for credit but who spends a lot and wants to earn rewards.

-The other type of customer is one who’s averse to debt, yet financially responsible.

American Express representative Tim Elgar explains that a charge card combines the discipline of a debit card with the benefits of a rewards card.

“Customers who consistently miss payments will be moved to a more traditional credit card,” says Elgar.

Since they don’t profit much from interest rates, American Express makes money capturing merchant fees from retailers each time you swipe your card. Their line-up of charge cards also comes with some fairly hefty annual fees — $150 for the Gold Rewards card, $499 for the AeroplanPlus Platinum card and $699 for the Platinum card.

Related: Premium cards offer reward variety — for a $699 fee

While Visa, through its controversial smallenfreuden campaign, wants its customers to put small, everyday transactions on credit to help increase card spending, American Express also looks to capture a larger percentage of consumer spending to gain on its rivals.

To do so, they’ve offered some of the richest and most robust rewards programs in order to lure affluent spenders.

‘By design, our charge cards attract a more affluent customer,” says Elgar.

Charge cards are an enigma because, while they’re designed for people who have the discipline to spend less than they can afford, the accompanying rewards programs are geared toward wealthy customers with a taste for travel and experiences that are beyond decadent.

But the trouble for American Express has always been that its cards aren’t as widely accepted by merchants across the country. This turns off potential big-spending customers, or forces them to carry another credit card, which leaves American Express as a secondary or tertiary card that’s buried in your wallet.

A charge card might be a good fit for those who travel frequently or rack up a lot of expenses for business. You’ll benefit from a much higher spending limit than a traditional card.

This way you can charge more of your expenses to your card and take advantage of a generous rewards program, making the annual fee a bit easier to swallow.

Just take care to pay your bill in full and on time, and don’t get caught up trying to obtain rewards that require an obscene amount of spending.


By:  Personal Finance, Published on Sun Jun 30 2013

Robb Engen blogs at Boomer & Echo. Reach him at

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