The Difference between Charge Cards And Credit Cards

Credit cards often get called charge cards, probably because when card holders use their credit cards, they call it “charging” the purchase to their credit card. That may have been well and good during the past, when charge cards were quite rare. Now, however, charge cards are making a comeback and consumers had better be aware of the difference between charge cards and credit cards, lest they get the wrong kind of card.

Most consumers know what a credit card is. Few, however, know what a charge card actually is. In terms of paying at the cashier, there is not that much of a difference between the two. The main difference between the two cards is basically on how card holders pay for their charges and on the credit limits that they offer.

With charge cards, the card holder has to pay off his or her balance completely after every month. Unlike credit cards, charge cards do not allow carrying balances across statements every month. With no balances carried over after each month, charge cards have no use for interest rates or minimum monthly payments. If a holder is unable to pay his or her balance at the end of the month, penalties such as late fees will be charged on them. There are, however, a few issuers who offer revolving debts, though they allow only a portion of the debt to be revolved. American Express, for instance has a charge card which allows holders to pay a few select transactions over a period of time. These revolved balances do incur finance charges, though.

Charge cards also do not have a preset limit. With charge cards, purchases a card holder makes is approved according to his or her payment and spending history, credit records and financial resources.

Charge cards are making a comeback these days because credit card companies are now less willing to risk their credit and would prefer to see debts paid as soon as possible. For consumers, charge cards are a great way to build their credit history while still avoiding getting into serious debt. Charge card purchases get reported to credit tracking companies in largely the same way as credit cards do and since the balance has to be paid every month, consumers need not worry about incurring interest charges and other late fees. Charge cards also have rewards similar to credit cards which, unfortunately, are balanced with the fact that card holders will also have to deal with annual fees if they carry charge cards.