Charge Card vs. Credit Card

What is the difference between a charge card and a credit card?

There are so many similarities between a charge card and a credit card that many people refer to them as being the same thing. However there are differences between the two that you should be aware of.

When you have a credit card and use it for purchases, you can make a monthly payment when you receive your statement. You do not have to pay the balance in full. There is interest charged on the unpaid balance and the minimum payment includes this interest. You can also make more than the minimum payment if you wish.

However, when you have a charge card, you have to pay the total of the amount of balance showing on the statement. You do not have the option of making a partial payment and then carrying the remainder over to the next month. If you are unable to pay the balance in full, the interest that is charged is very high. This makes it very risky to use a charge card and not pay attention to the total cost of the purchases for which you use it.

With a credit card you do have additional time to make the payment. The date on which the payment is due is printed on the statement and even though it may be within a few weeks from the time you receive the statement, technically your payment is not late until it is over 30 days before you make the payment. This is a benefit of using a credit card over a charge card.

A credit card lets you make purchases on credit in which you buy now and pay later. However, this is not the case with a charge card because you do have to pay the full amount of the outstanding balance. There is an advantage though in having a charge card because in this way you don’t add to your debt every month by only making the minimum payment. The cost of insurance coverage on a credit card is much lower than that of a charge card.

There are many credit card companies that offer both charge and credit cards. One such company is American Express.