Many people don’t realize the difference between a credit card and a charge card. A credit card allows you to make purchases for which you are billed later, paying all at once or in installments if you wish. A credit card lets you carry a balance from month to month, paying interest. A charge card, on the other hand, is a completely different type of credit card. When you use a charge card you’ll receive a bill that is payable in full immediately and cannot be rolled over to the next billing period. A charge card, therefore, has no APR, because interest is not charged.

A charge card can be thought of easily as a short-term loan. If you fail to pay your entire balance when you receive your statement you are subject to a very high fee–as much as 5%. In addition, the issuer may restrict future purchases or even cancel your card.

Although it’s usually a rule that charge card balances are due in full each month, there are exceptions. American Express, for example, has a program called the Extended Payment Option, or EXPO, allowing cardholders to pay for purchases over $200 over a period of time. There’s also something called the Sign and Travel program, which allows cardholders to pay for travel-related expenses over time.

Charge cards are often used by large businesses, as well as the government, to keep track of official purchases and transactions. Consumers are given access to charge cards through high-end retailers like Neiman Marcus. American Express and Diners Club also offer charge cards to select members. Charge cards are usually only available to individuals with very high credit ratings and high incomes.

The rates offered by charge cards are usually very good and are often 0%. There are, however, usually annual fees. A popular charge card is the American Express Preferred Rewards Gold Card, which has no setup fee but charges $125 annually. The card earns great rewards, including a $100 bonus when you spend $500 in three months. In addition, the AmEx card also has insurance benefits, which can be very useful. The card is great for travelers as well, offering baggage insurance, global assistance, and emergency check-in services that allow you to check into a hotel even if your card has been stolen.

Charge cards are a great option for people that can afford to pay their balance in full each month because they often have good rewards and programs while charging no interest rate to cardholders. Typically, the best charge cards available to consumers are from American Express. When deciding on a charge card, compare any programs and insurance options available, as well as any start-up and annual fees.