Are They The Same?
A lot of people think that they are one and the same. The confusion is compounded by the fact that the same institutions that have issued credit cards also issue charge cards. This has led people to assume that charge card is just a
synonym for credit cards. This, however, is far from the truth. Let look at the both:
The Difference With Your Outstanding Balance
To begin with, what is a charge card? And, is a charge card better for you versus a credit card? Understanding the difference between the two will help make it easier for you to choose. Both credit cards and charge cards allow you to make purchases on credit. In the case of a credit card, you can spread the payments out over months or even years. All you need to do is make the minimum payment each month.
By definition, with a charge card the outstanding balance has to be paid in full every month. If the payment is not made at the end of the month, the charging privileges get suspended and you will be unable to use the card to make a purchase. Additionally, a high penalty (as high as 5 percent) may be charged on your outstanding balance.
Credit Limits & More
All credit cards have a preset credit limit which cannot be exceeded. Charge cards, on the other hand, have extremely high or absolutely no preset limits. Since, the entire outstanding amount is due within a month’s time; it is the user’s responsibility to ensure that he only spends what he is capable of paying back at the end of the month.
Annual Fee vs. No Fee?
The other huge difference is that purchases made on the charge do not accrue any interest. However, every charge card typically charges a fee for its use. But, to offset the annual fee, charge cards usually offer premium benefits to users that are not available with credit cards. Just go through the benefits offered by the American Express charge cards versus their credit cards and you will see that they go above and beyond.
Posted in: American Express
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