Difference Between Charge & Credit Cards
The terms credit card and charge card are often used interchangeably, though each is a different financial instrument. Though credit cards and charge cards may be offered by the same company, there are significant differences.
Credit Card
1. A credit card is essentially a loan that the user can use as they wish. If a user buys something on the credit card and is unable to pay the bill, they can pay a portion of it and keep a balance on their card. This balance will be charged interest, just like any other loan.
Charge Card
2. A charge card does not extend the user credit. The charge card must be paid off at the end of each billing cycle.
Fees
3. Charge cards typically make their money in two ways; by charging merchants a fee for accepting the card, and by charging card holders an annual or monthly fee for being able to use the card. Credit cards often do not have user fees as they can charge interest to card holders who are carrying a balance.Interest
4. Charge cards do not generally charge interest as no balances are maintained. Credit cards charge interest on balances.
Disclosures
5. Both charge cards and credit cards must disclose to the users what charges and fees will be charged to them, and why.