Difference between Credit Cards and Charge Cards


A credit card give you credit. That means that you do not have to pay your bills fully and you can carry a balance. You will be charged an interest on the balance that you carry. The rate that you will be charged is the APR (annual percentage rate), which is stated in the terms and conditions of your card. This is one of the ways that credit card companies make money.

A charge card on the other hand, requires that you pay your bills in full. That means that you cannot carry a balance. The most famous charge card is the American Express Rewards Gold Card, along with the Diners Club Charge Card.

Most charge cards have an annual fee. The reason is that these cards cannot make money from cardholders carrying a balance (they also make money from merchants whenever a transaction takes place).

Should you get a charge card or credit card. Well, if you need credit and carry a balance occasionally, getting a credit card makes sense as most do not have annual fees. Though a charge card has annual fees and does not allow you to carry a balance, they have very good reward programs. For example, the Membership Rewards from American Express and Diners Club Rewards are perhaps the best reward programs around.

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