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The Difference Between Charge Cards, Credit Cards and Debit Cards

Yes, there really is a difference. More often than not people just seem to say “oh, just put it on the card.” “The card” has come to mean any piece of plastic people can use to pay for something. There are some major differences between charge cards, credit cards, and debit cards, though, and it’s important to do your research before you choose which card to get and use on a regular basis.

Charge Cards

Charge cards and credit cards are the most similar of the three, but there are some tricky differences between the two that you should know.

  • Charge cards do NOT have a preset spending limit.
  • You generally have to pay your charge card bill in full every month. (Although it’s always a good idea to pay off your cards completely and not carry a balance, but that’s another story!)
  • Charge cards often have an annual fee.
  • There are fewer charge card issuers than credit card issuers.
  • If you lose your card or someone steals it, typically you aren’t responsible for any charges that were made.

It’s also important to note that if you can’t make a full payment each month, the charge card issuer reserves the right to shut down your card and charge you a fee. However, charge cards usually don’t have a spending limit on your card, but that doesn’t necessarily mean you have unlimited spending power.

Credit Cards

Credit cards can sometimes offer more flexibility than charge cards, depending on your lifestyle.

  • Credit cards DO have a preset spending limit.
  • You do not have to pay off your credit card each month. You will be issued a minimum payment, and any balance beyond that will be carried over with interest to the next month. (Again, it’s a good idea to not carry a balance and to always pay off your credit card bills!)
  • Credit cards can have an annual fee, but there are many options that offer cards without fees, like Discover.
  • There are many options when it comes to issuers of credit cards.
  • If your card is stolen, you usually won’t be held responsible for the money that has been spent without your knowledge.

Credit cards give you flexibility if you can’t make a full payment at the end of the month, but there will also be a cap on how much you can purchase on credit throughout the month. 

Debit Cards

Debit cards are fairly different from charge cards and credit cards.

  • Debit cards are linked directly to your bank account, either checking or savings.
  • Money is automatically pulled from your account to make the payment.
  • There is no “monthly payment” on a debit card, since you are paying for your purchases directly throughout the month.
  • You cannot overspend with a debit card, as your card will be declined if your bank account does not have enough money to make the purchase.
  • If your debit card is stolen, you are less protected against purchases made with your card.

Debit cards are easy to get, even if you don’t have good credit, and are usually accepted anywhere.

For easy reference, here are some of the biggest differences between the three:

Charge Cards Credit Cards Debit Cards
Pay in Full Monthly Yes Not required No
Pay a Minimum Monthly No Yes No
Pay Throughout the Month No No Yes
Spending Limit No Yes – credit ceiling Yes – $$ in bank account
Rewards Programs Yes Yes No
Annual Fee Often Sometimes No
Protection if Stolen Yes Yes No

Choosing between credit, debit and charge cards can be a big decision. If you’re just starting out, choosing a credit card with no annual fee, a good rewards program (like cash back), and a low credit ceiling is a good option. This can help you build your credit without tempting you with lots of credit that could get you into debt.