American Express is the only creditor in Canada that offers charge cards, which are slightly different than credit cards. Examples of these charge cards are the AMEX Gold (this is a referral) and the AMEX Platinum card (this is a referral). A reader asks: “What’s the difference between a Charge Card and a Credit Card?”

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The main difference between a charge card and a credit card is that a charge card does not have an established credit limit, whereas a credit card does. To decide whether or not a charge on the charge card will be approved, AMEX will automatically consider a number of factors for every charge, and make a decision on whether or not to approve it each time. In contrast, a credit card has an established limit, and once you exceed that limit, the creditor will decline the transaction (although creditors do sometimes allow you to exceed your credit limit, with a fine for going above your limit).

A charge card will typically have a very high interest charge on balances. For example, the APR on the AMEX Gold is 30%, whereas a typical credit card will have an interest rate of between 0-20%. On a charge card, you’re expected to pay off the entire balance each month, whereas on a credit card you’re allowed to carry a balance, so long as you make your minimum payment.

On your credit report, a credit card will show your total available credit as your credit limit. In contrast, a charge card will reflect the total available credit as the highest balance ever held on your charge card. For example, if in December I spent $10,589, the highest ever spent in a month on that card, the charge card will reflect on my credit bureau as having a credit limit of $10,589.

Practically, there really isn’t a difference between a charge card and a credit card in terms of end use. My advice is to not worry whether something is a charge card or a credit card – it won’t affect your life in any way.