About Charge Cards

Most people are familiar with credit cards: you spend first and repay when the statement closes. A Charge Card is a special type of credit product, and the biggest differences versus a regular credit card are the spending limit and repayment rules. In terms of limit, a charge card does not have a preset spending limit, while a credit card has a fixed credit limit. In terms of repayment, after each monthly statement closes, a charge card requires you to pay off the entire balance, while a credit card can theoretically be kept current by paying only the Minimum Payment.

In fact, charge cards are becoming less common now. AMEX is the main issuer of Charge Cards, including familiar cards such as:

  • AMEX Platinum personal and business versions
  • AMEX Gold personal and business versions
  • AMEX Green personal and business versions

Chase used to have a few Charge Cards as well, such as the Chase Ink Bold, but those have been discontinued and replaced by regular credit cards like the Ink Preferred.

Do Charge Cards Really Have No Spending Limit?

When you are approved for a credit card, you are usually told what your credit limit is. That limit means the maximum amount you can spend at one time; in other words, your balance generally cannot exceed your credit limit. Take my AMEX Everyday card as an example: the limit is $5,000. After spending $800, you would have only $4,200 left to spend. If you then wanted to make a $4,500 purchase, it would be best to first pay down $300 so you have enough available credit.

But from the interface, a Charge Card really does not show a specific limit. Below is my Platinum card. In the same place, it does not show a spending limit or remaining available credit.

Of course, AMEX says that even though it does not tell you the amount, there is still an internal limit. If you click the question mark, AMEX shows you:

No Pre-Set Spending Limit does not mean unlimited spending. Purchasing power adjusts with the use of the account, payment history, credit record, and financial resources known to us, and other factors.

In short, my take is: your spending limit is whatever AMEX decides it is, but it does not tell you in advance, so you just have to try. That said, AMEX also provides a way to check this hidden limit. Click the Check Spending Power tool below, and you can see how much you are able to spend (carry balance) [Note: do not use this feature too frequently, or it may trigger FR].

After checking, spending $5,000 is indeed no problem.

AMEX may dynamically adjust your hidden spending limit based on your recent spending and income. A reminder here: if you check your spending power repeatedly and test especially high amounts, it may trigger an AMEX Financial Review. After all, if AMEX sees that you want to spend that much, it will want to make sure you are not about to run off. Of course, if you are an ultra-high-net-worth big shot, it may still be possible to put an antique worth hundreds of millions on a Centurion card—just swipe away.

Under special circumstances, a Charge Card can also be given a hard spending cap. For example, after an AMEX Financial Review, if AMEX believes your income cannot support your overall credit exposure, it may impose a hard limit on your Charge Card. The image below shows author KUKU's Green card after FR, with a hard limit added.

Generally speaking, if your account behavior is good for about a year, this hard cap may be removed.

What Happens If You Do Not Pay a Charge Card on Time?

For a typical credit card, if you do not pay by the statement due date, you are generally charged two types of costs: a Late Fee and interest. The late fee depends on whether you paid the minimum payment, while interest is charged on the unpaid portion. For example, if your statement is $100 and the Minimum Payment is $30, then if you pay only $29, you would first be charged a $40 late fee, and the remaining $71 would accrue interest based on the APR. If you paid $31, you would not owe a Late Fee, but you would still owe interest. If you paid the full $100, you would owe neither.

As for interest, the APR is determined based on your own profile. If you always pay on time and have a high credit score, the bank may give you a lower APR, for example 12.99%.

If you have a Charge Card and do not pay by the statement due date, you are also generally charged two types of costs: a Late Payment fee and interest. The Late Payment fee depends on whether you paid the entire statement balance. If even a small amount remains unpaid, you must pay this $40 fee. Interest is still charged on the unpaid amount, and the rate is based on the highest 25.12% Cash Advance APR (that is, the same rate as if you directly used the charge card for a cash advance). For example, if your charge card statement is $100 and you pay only $99, you would first be charged a $40 late fee, and the remaining $1 would accrue interest at 25.99% APR. Only by paying the full $100 would you avoid all fees.

In short, with a Charge Card, it is best to pay off the entire balance after the statement closes and before the payment due date. Otherwise, the interest can be very high.

How Charge Cards Affect Applications

Overall, because Charge Cards are perceived as having “no preset limit,” they are usually a bit harder to get than regular credit cards and may require a higher credit score. In actual applications, though, AMEX is still fairly friendly, and there is basically no major difference between applying for a credit card and applying for a Charge Card. That may also be because AMEX can control your hidden spending limit in the background with its algorithms anyway—if it does not want to approve that much spending, the charge simply will not go through.

For many people, another advantage of Charge Cards is that they do not count toward the AMEX 5-credit-card limit. If you already have five AMEX credit cards, you generally need to close one before another credit card application can be approved. But if you apply for a Charge Card, it does not count toward that 5-card limit. That said, AMEX has now also quietly introduced a limit of 10 Charge Cards per person, so applications are no longer truly unlimited.