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

Pop quiz! If you don't know, it's time for a little Personal Finance 101.

Mar 29, 2014 at 11:28AM

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.

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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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