What Is the Difference Between a Charge Card and a Credit Card?

At the checkout, do you charge your purchases? Put it on the charge card? Charge it to the credit card?

The terms "charge card" and "credit card" are used so interchangeably that you'd be forgiven if you thought they were the same thing. However, they are most definitely different.

Let's go ahead and run down the differences before you accidentally apply for a charge card when what you really want is a credit card.

Charge cards vs. credit cards
Charge cards and credit cards both let you do the same thing -- buy now and pay later -- but they are very different animals.

With a charge card, you are required to pay off your balance each month. If you fail to do so, you get slapped with a late fee. If you are late or fail to make a complete payment on more than one occasion, you could see your card quickly cancelled.

Credit cards, on the other hand, allow you to carry a balance month to month. You'll pay interest on the balance but so long as you are making monthly minimum payments on time, you can keep on spending until you hit your credit limit.

Which, speaking of limits, charge cards have none. You can spend as much as you want so long as you pay it back at the end of the each month.

Finally, some charge cards can also be used as credit cards. For example, American Express offers a Pay Over Time feature. This option allows charge card holders to make multiple payments for large, qualified purchases.

Which card is right for you?
By far, most of the products offered today are credit cards rather than charge cards, and credit cards typically meet the needs of most consumers. However, you may want to consider a charge card if you are able to pay off your balance each month.

Rewards programs for charge cards are typically much more generous than those offered on credit cards. However, charge cards also often apply an annual fee that can be several hundred or even several thousand dollars. So be sure any rewards points you earn will offset the cost of the card.

In addition to better rewards, charge cards offer more flexibility in terms of your spending. No need to worry about being declined for being over a credit limit, although you need to have the self-discipline to avoid charging more than you can comfortably pay back each month.

Finally, charge cards may make sense for those who have business expenses that are reimbursed each month. Since these costs can vary month to month, charge cards are a convenient way to spend whatever amount is needed while earning significant rewards points. Frequent travelers may also find charge cards are the best travel rewards cards.

While it may seem like splitting hairs to distinguish between a charge card and a credit card, the two operate in very different ways. Before you apply for your next card, take a moment to double check that it is actually the type of card you want.

The original article: What is the difference between a charge card and a credit card? appeared on CardRatings.com.

Your credit card may soon be completely worthless
The plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.

Additional credit card articles can be found on CardRatings.com.

8 costly mistakes on your credit card agreement

9 stupid things you're doing with your credit card

6 secrets to managing multiple credit cards 


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2889163, ~/Articles/ArticleHandler.aspx, 8/22/2014 9:51:31 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement