Shanu Singh Guliani

Credit Cards VERSUS Charge Cards

We all know about credit cards. Almost everyone has at least one—and other’s a wallet full of those plastic things. We also like to call them charge cards, but there are significant differences between charge cards and credit cards.

Many people use the terms credit card and charge card interchangeably, but there are important differences. In general, a credit card lets you make purchases for which you are billed later. Most credit card accounts allow you to carry a balance from one billing cycle to the next; however, you have to pay interest on that balance. Usually, you have to pay at least a certain amount of your balance each time you receive a bill.

A charge card is a specific kind of credit card. The balance on a charge card account is payable in full when the statement is received and cannot be rolled over from one billing to the next. Because you cannot carry a balance, a charge card doesn’t have a periodic or annual percentage rate.

The use of a charge or credit card allows the cardholder to increase their credit rating and get better interest rates on future loans. But if you’re prone to being behind with payments, a charge card might be a better way to limit your spending. Since you’ll have to pay it all back each month, you won’t have to worry about having a balance that continues to accrue interest, even when you’re not spending. But if you like the flexibility of not having to pay off balances each month, then a credit card is the better option.

Posted by Shanu Singh Guliani on May 21, 2008 | Comments (3)