Credit Card or a Charge Card? | CreditShout

Credit Card or a Charge Card?

By Dawn Allcot / May 31, 2010


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Many people use the word “charge card” when they mean credit card. Likewise, you may have an American Express charge card and call it a credit card. But what is the difference?

A charge card is simply a promise (on your part) to pay for merchandise at the end of the month. Charge cards:

  • Have no pre-set spending limit
  • Don’t accrue interest, since you don’t carry a balance

A credit card, on the other hand, is a form of revolving debt. Which leads us to another term to define: What is revolving debt?

Revolving debt means that the borrower does not have to pay the balance in full each month. He or she may have to make a minimum payment, based on the total amount borrowed.

This is in contrast to an installment loan, which requires pre-set payments to be made each month, even as the balance borrowed decreases. Examples of installment loans include:

  • Mortgages
  • Car loans
  • Personal or business loans from your bank or credit union

  • Benefits of a Charge Card

    Charge cards are typically harder to get than credit cards. You must show an excellent credit rating and also the income that shows you can pay for any purchases you make at the end of the month when you receive your statement.

    Many people acquire balances on their credit cards a little bit at a time, without realizing it. They fail to make their payment in full at the end of the month, and then charge more the next month. Before they know it, they may be thousands of dollars in debt and unable to make their monthly payment.

    It’s harder to get into financial trouble with a charge card, because your payment is due at the end of the month. Of course, you could spend more than you can afford within those 30 days before your bill comes due. But the likelihood of losing track of your spending decreases because the time frame is so much shorter.

    If you don’t want to carry cash, but don’t want to accumulate debt, either, a charge card may be the right choice for you. If you are looking for a card that offers the benefits of a credit card, such as warranty protection, and a printed record of your spending at the end of each month, a charge card will serve you well. Many charge cards, including the popular American Express Platinum card, offer generous rewards and benefits — you won’t get that if you simply pay cash for every purchase.

    A charge card is a convenient way to track your spending, avoid carrying cash, and take advantage of numerous benefits. CreditShout recommends the American Express as our top choice in charge cards. You’ll never pay interest, because you pay your balance at the end of each month.
    Benefits of a Credit Card

    Maybe you’re like many Americans and haven’t yet gotten to the point of saving the recommended three months living expenses in case of an emergency. Maybe you have no emergency fund at all, but have taken years to build a good credit rating.

    Why not let that credit rating work for you with a credit card that you can keep for emergency use?

    A credit card is a better choice than a charge card if you want credit you can tap into in case of an emergency and are responsible enough, on a regular basis, to manage your spending without going over what you can afford to pay back. It’s good financial practice to pay off your credit cards each month and avoid interest charges. But it’s nice to know that you have the option to carry a balance if you need to — for things like car repairs or emergency home repairs.

    Just like charge cards, many credit cards offer additional benefits — including travel protection insurance and warranties — and generous rewards programs. Our top pick for a credit card here at is the Discover More card.

    The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are the author's alone. Additionally, the opinions of the commenters are not necessarily the opinions of this site

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