What Is a Cost Card? Execs, Cons, and Options

A cost card is likely one of the many types of plastic you possibly can carry in your pockets (or the digital plastic you possibly can preserve in your digital pockets app). It seems to be, feels, smells and tastes rather a lot like a bank card, however there are some key variations between the 2.

Right here’s all the things you have to learn about cost playing cards, how they work, how they’re totally different from bank cards and why you’d need one (or not).

What Is a Cost Card?

A cost card is a cost technique that resembles a bank card however has no preset spending restrict and should be paid in full every month. A cost card doesn’t include a minimal cost choice like a bank card, and can cost late charges in the event you don’t repay a month-to-month stability, somewhat than letting your stability accrue curiosity.

Cost playing cards are fairly uncommon for people (you’re extra prone to see bank cards), however you would possibly see this credit score choice for playing cards supplied by gasoline stations or retail retailer chains (although many retailer playing cards are common bank cards now, too).

Most remaining cost playing cards are designed for companies or high-earning people.

The phrases “cost card” and “bank card” are sometimes used interchangeably, however they’re not the identical sort of account. The important thing variations are in the way you repay the creditor to your prices.

Cost Card vs. Credit score Card

Options Cost Card Credit score Card
Transactions Swipe or enter quantity to make a purchase order on credit score Swipe or enter quantity to make a purchase order on credit score
Spending restrict Sure No
Minimal cost Sure; 1% to 2% of assertion stability + int. and charges n/a
Curiosity 16% to 36% on common Not typical; 18% to 26% if relevant
Credit score reporting Funds, stability, credit score utilization Funds, stability


A transaction with both often seems to be the identical: You swipe a card or enter the cardboard quantity, and the creditor covers the acquisition. You accrue a stability as you store with the cardboard, and also you repay it to the creditor to get your stability again to $0.

Spending Restrict

Bank card accounts include a credit score restrict, the utmost stability you possibly can accrue on the cardboard earlier than it’ll now not allow you to make purchases. A cost card doesn’t include a spending restrict.

Minimal Fee and Curiosity

For each a bank card and a cost card, you obtain a month-to-month assertion exhibiting how a lot you’ve spent and the way a lot you owe.

A typical bank card month-to-month assertion contains:

  • Assertion stability: the whole prices accrued as much as the final day of the billing cycle.
  • Present stability: all prices, together with any you’ve made for the reason that final day of the billing cycle.
  • Minimal cost: the quantity due by the due date (often inside a month), sometimes a mixture of 1% to 2% of your assertion stability, plus curiosity and charges accrued throughout the billing cycle.

You possibly can keep “present” in your bank card funds by making simply the minimal cost every month, even whereas your card carries a stability from month to month. So long as you carry a stability, it’ll accrue curiosity based mostly on the speed in your settlement (which may very well be variable and alter barely over time).

In distinction, a cost card requires you to repay the excellent stability in full every month (or billing cycle). You’ll incur late charges in the event you don’t pay in full by the due date, and also you received’t have the ability to make further purchases till you repay the stability. Your stability doesn’t accrue curiosity.

Credit score Scores

Cost playing cards and bank cards can have an effect on your credit score rating a little bit in a different way.

Credit score utilization — how a lot of your out there credit score you’ve used at any given time — is a significant factor in figuring out your credit score rating underneath most fashions. Bank cards are a serious contributor to this. Your credit score utilization is most frequently the distinction between your present stability and your whole credit score restrict throughout all playing cards.

As a result of cost playing cards don’t impose a spending restrict, your spending on these playing cards doesn’t depend towards credit score utilization. Neither VantageScore nor FICO (the key scoring fashions) take cost card balances into consideration when calculating utilization.

That doesn’t imply your cost card stability doesn’t affect your rating, although. The debt continues to be often reported to credit score bureaus, and unpaid payments can negatively affect your rating whereas an on-time cost historical past can have a optimistic affect.


Each cost playing cards and bank cards can include rewards applications that allow you to earn factors for money, assertion credit score, flight miles, lodge factors or different perks based mostly in your spending. Cost playing cards hooked up to a retailer or gasoline station model are prone to provide solely retailer credit score for that model, whereas bank cards usually provide a broader vary of rewards.

How Do Cost Playing cards Work?

Utilizing cost playing cards is the same expertise to utilizing bank cards on the level of transaction: You swipe the cardboard or enter the cardboard quantity to make a purchase order, the cardboard issuer covers the acquisition and also you owe the issuer the stability.

Cost playing cards don’t include a restrict in your out there credit score, so you possibly can spend as a lot as you need on the cardboard. You simply need to pay the stability in full every month or billing cycle, somewhat than carrying a stability and accruing curiosity. You’ll possible incur charges for late cost and be unable to make new prices till an impressive stability is paid off.

Execs and Cons of a Cost Card

There are professionals and cons to utilizing a bank card. We’ve gathered probably the most outstanding of them that will help you determine if a cost card is the suitable transfer for you.


  • No spending restrict
  • No curiosity on excellent stability
  • Onerous to build up debt you possibly can’t handle
  • Spending doesn’t affect credit score utilization


  • Not supplied by most card issuers
  • Could be restricted to particular manufacturers, like a gasoline station or retail retailer
  • Most frequently out there for companies or people with wonderful credit score and excessive earnings

Options to a Cost Card

The trendy different to a cost card is a bank card. Most issuers have completed away with their cost card choices and changed them with bank cards.

Bank cards include some drawbacks in contrast with cost playing cards, and it’s simpler to build up debt that grows with curiosity and late charges, particularly when you’ve got a excessive credit score restrict. Nonetheless, bank cards have a tendency to come back with higher rewards applications than cost playing cards.

In case you’re searching for a method to store with out carrying money and need to preserve your spending inside an quantity you possibly can repay inside the month, a debit card can also be a very good different to a cost card. Debit playing cards are linked to your checking account, so you possibly can solely spend the cash you have already got readily available.

When you have irregular earnings or money move and sometimes want a small credit score to drift you till payday, you possibly can open an account with a financial institution like Chime or Varo, which supply a low-cost money advance. This feature is just like a typical checking account’s overdraft safety, however comes with a a lot decrease charge and higher bumpers to maintain you from severely overextending and accruing infinite charges.

Regularly Requested Questions (FAQs) About Cost Playing cards

We’ve discovered the solutions to the principally generally requested questions on cost playing cards.

What Is the Objective of a Cost Card?

A cost card is a cost choice that extends credit score to allow you to make a purchase order and pay for it later. They’re most frequently out there for companies or high-earning people. They assist enhance money move by letting you make purchases anytime and paying your stability in full every month.

What Credit score Rating Do I Want for a Cost Card?

Most cost playing cards require a wonderful credit score rating (round 750 and above) and excessive earnings.

Are There Charges Related With a Cost Card?

Like bank cards, a cost card would possibly include an annual charge, and also you’ll pay late charges for overdue funds. When you have good to wonderful credit score, it is best to search for cost playing cards that don’t have any charges and that pay a welcome bonus. Listed here are 9 of the finest bank cards with no annual charges for 2022. 

What Curiosity Fee Do Cost Playing cards Have?

Cost playing cards don’t sometimes cost curiosity, as bank cards do. As a substitute, your excellent stability is due in full every month. Some cost playing cards embody an choice to repay in installments over time, and people will embody an rate of interest. A typical cost card APR is a little bit increased than that for bank cards, so it may very well be round 18% to 26%, relying on the issuer.

Contributor Dana Miranda is a Licensed Educator in Private Finance® who has written about work and cash for publications together with Forbes, The New York Instances, CNBC, Insider, NextAdvisor and Inc. Journal. 

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