Credit cards and charge cards look and function the same on the surface. However, charge cards actually work much differently than a traditional credit card. Unless your familiar with the different types of cards out there, you aren’t going to be able to tell the difference between the cards just by looking at them.
With all the different credit card lingo out there it gets confusing when it comes to the different kinds of cards. This article will clarify the difference for you and help you decide which type of card is a better fit for you.
Credit Card vs. Charge Card
Credit cards allow you to make a purchase and be billed for it later. There are all different types of cards, cards that give you rewards, cards that build credit, cards that are for students, and more. The balance you have on the card can be carried over from month to month. Most likely you will be paying interest on the balance you carry over and a minimum payment is required each month. The interest rate you are charged is based on your creditworthiness and some cards even offer special low introductory rates for cardmembers.
Credit cards are issued by banks, retail stores and even some oil companies. A Nilson Report that was published early 2010 reported the total number of credit cards in circulation at the end of 2009 at 576,400,000. Chase, Citi and Bank of America make up the bulk of that huge number. There are credit cards available for those with not so good credit and there are cards available for those with excellent credit.
Charge cards also allow you to make purchases and be billed for them later. The big difference with a charge card is that you are required to pay the balance off each month in full. Balances cannot be carried over from month-to-month, so there is no interest rate, APR, or minimum payment. The most well known charge cards are those issued by American Express, but there are many others on the market. Among the most popular, especially with small business owners, is the Chase Ink Bold.
Annual fees are in the $100 range form most charge cards, and offerings include points for things like airline miles and concierge service to help with hotel and restaurant reservations. When it comes to being approved for a charge card you have to have good to excellent credit.