What is a Charge Card? And How Does It Differ from a Credit Card?

Wallet with credit cards next to coffee mug

When you walk up to a cashier to make a purchase for your business, you’ll likely pull out a plastic card as your payment method of choice. The same goes for online purchases. And when it comes to business expenses in particular, tracking purchases on a card is much easier than keeping tabs on petty cash. 

But does it make a difference which type of card you use to pay? Many everyday consumers use the terms “charge card” and “credit card”  interchangeably and see no difference among the pieces of plastic in their wallets. However, there are some key differences between the two types of cards, and business owners should familiarize themselves with the pros and cons of each. 

So, What Exactly is a Charge Card? 

While we may use the words charge card and credit card interchangeably, we are much more familiar with the concept of the credit card these days. So…what’s a charge card? 

Charge cards originated in department stores in the 1920s as a way for customers to make one monthly payment for all their purchases that month. They grew in popularity in the 1940s in the restaurant industry, as one cardboard card became widely accepted in New York City restaurants. 

The original intent of the charge card was to allow customers to pay one bill every month instead of several, but they were still on the hook for paying that bill in full—a key difference from the credit cards we know today. 

Put your accounting on autopilot.

Scalefactor dashboard screenshot

Charge Card vs. Credit Card: What’s the Difference? 

So what else is different about the credit card? There are quite a few differences between the two options, from the way spending limits are set to the rewards and perks offered.  

Monthly Payments

The biggest difference between charge cards and credit cards centers around when payments are due—and how much is due at once. Credit cards, as most of us know, allow users to carry a balance over several months if they need it. When the purchaser gets a bill, they can choose to make the minimum payment, to pay off the charges in full, or make a payment somewhere in the middle. 

Charge cards don’t offer the same level of choice. Rather, they require that business owners pay off the balance in full every month. Users who usually pay off their bills in full won’t notice much of a difference when it comes time to make a payment.

Spending Limits 

If charge cards don’t offer flexible payment dates, you might wonder what some of the benefits are. One possible advantage comes in the form of variable spending limits. 

Credit cards typically come with one spending limit that you can’t exceed. You might adjust that limit over time, but it’s relatively fixed month after month. If your spending limit in January is $10,000, you can expect your February spending limit to also be $10,000. 

Charge cards don’t allow for unlimited spending, but their limits are much more fluid and can vary from month to month based on things like your past payment history. ScaleFactor Card users, for example, can always see their current spending limit right in the app. 

Rewards & Perks 

If you’ve watched any television commercials lately, you know that credit card issuers love to highlight their cards’ perks. Double miles with no blackout dates! Triple points on groceries! Quadruple points on gas! 

Traditionally speaking, credit cards tend to offer fewer rewards, though they are available on the market. 

Note: The ScaleFactor Visa Card is switching this up. It returns 1% cash back on all spending (and no annual fee).

Interest Rates & Late Payments 

Because charge card users must pay off their balance in full each month, no interest is charged on transactions. Credit cards, on the other hand, can charge high interest rates for balances that carry over to the following months. 

But what happens if you can’t pay your charge card balance? In that case, penalty charges would typically kick in on the outstanding amount. Because the penalties are higher for late or missed charge card payments, they can help instill financial discipline. 


Charge CardCredit Card
Monthly PaymentsBalance must be paid in fullMust pay set minimum payment on balance
Spending LimitsUsually flexible Usually fixed for several months
Rewards & PerksTraditionally less prevalent but offered sometimesWidely offered and varies from card to card
Interest RatesNo interest because no carried balancesVaries from card to card
Late Payments Higher late payment charges because balance should be paid in fullOften lower but varies from card to card

Put your accounting on autopilot.

Scalefactor dashboard screenshot

Benefits of Using a Charge Card for Your Business

With the vast amount of credit card options available, when would it behoove a business owner to consider a charge card? There are several potential benefits to using a charge card that should be weighed before deciding, including: 

  • Flexible Spending Limits: Because spending limits are not fixed, business owners might be able to borrow more using a charge card. If you just received a big purchase order and need to buy supplies or inventory before payment is received, a charge card could be the best route. It allows you to pay for that inventory, even if you don’t have the cash on hand, because you know that you will have it when the order is complete. 
  • Financial Discipline: If you’re trying to tighten up spending within your organization, a charge card that you must pay off can help keep expenses from snowballing. A card like the ScaleFactor Card, which works like a charge card, allows you to manage and approve expenses and can offer even more control over and visibility into company spending.  
  • No Interest, Some Annual Fees: When you pay off your balance in full, you don’t end up paying interest. For that reason, charge cards typically come with an annual fee. However, this is changing, as more charge card options emerge.  

How to Choose the Best Charge Card for You

If the idea of a charge card sounds appealing, the next step is deciding which card to go with. Because they are less prevalent than credit cards, there are fewer options to choose from.

The ScaleFactor Visa Card, which functions similarly to a charge card, is a new option for business owners looking for a more comprehensive card system. Because it links directly to ScaleFactor customers’ bookkeeping and accounting, they can manage all spending in one centralized location—seeing the impact of spending reflected in their books almost immediately. And unlike many other options,  the ScaleFactor Card does not have an annual fee.

The charge card world is changing quickly, and ScaleFactor is at the forefront of that change. To learn more about the ScaleFactor Card, schedule a demonstration today

Reader Interactions

Put your accounting on autopilot

Schedule a free consultation today.

Scalefactor dashboard desktop graphic