The charge card is the latest trend in the credit industry and is gaining immense popularity in a short span of time. More and more people are showing a marked preference towards charge cards as opposed to the traditional credit card. But, what is the difference between charge card and credit card? And, what are the highlights of the charge card vs. credit card debate?

Are They The Same?
A lot of people think that charge cards and credit cards are one and the same. The confusion is compounded by the fact that the same institutions that have issued credit cards so far are now issuing charge cards. This has led people to assume that charge card is just a new age name for credit cards. This, however, is far from the truth. Let look at the highlights in charge card vs. credit card.

Outstanding Balance
To begin with, what is a charge card? And, is a charge card better for you than a credit card? Understanding the difference between the two instruments of credit, charge card vs. credit card, will help make it easier for you to choose between the two. Both credit cards and charge cards allow you to make purchases on credit. In the case of a credit card, you can clear the outstanding balance over a few months, even years. All you need to do is make partial payments every month.

The charge card definition states that the outstanding balance on a charge card has to be paid in full every month. If the payment is not made at the end of the month, the charge card 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
There are many other differences in charge card vs. credit card. All credit cards have a preset credit limit which cannot be exceeded. Charge cards, on the other hand, have extremely high or absolutely no credit 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. If the payment is not made at the end of the month, the charge card 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.

Annual Fee
The other huge difference in charge card vs. credit card 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 card offers huge benefits to its users that are not available with credit cards. Just go through the benefits offered by an American Express business charge card, Visa charge card, etc. and you will see that they are way ahead of any benefits offered by most credit cards.

Want to know which ones we think are the best charge cards?