What is the difference between a charge card and a credit card?
A charge card and a credit card are both methods of payment, but they have some key differences:
1. Repayment: With a charge card, the balance must be paid in full each month, whereas with a credit card, you have the flexibility to pay off the balance over time, generally with a minimum payment required.
2. Credit Limit: While credit cards have a predetermined credit limit, charge cards often have no pre-set spending limit. The spending limit on a charge card is typically determined by factors like your income, credit history, and spending patterns.
3. Interest Charges: Charge cards generally don't carry interest charges because the balance must be paid in full each month. Credit cards, on the other hand, charge interest on any unpaid balance, which can accrue over time if not paid off.
4. Late Fees: Due to the requirement of full payment each month, charge cards may impose higher penalties for late payments, while credit cards often have more flexible payment terms and lower penalties.
5. Rewards and Benefits: Credit cards often offer various reward programs, cashback options, and other perks like travel rewards or insurance benefits. Charge cards also come with a range of rewards and benefits, but they typically offer more exclusive perks for higher spenders.
6. Eligibility: Charge cards are generally available to individuals with higher credit scores and income levels due to their stricter payment requirements. Credit cards, on the other hand, are more widely available and have options for people with varying credit histories.
It's important to note that these differences can vary based on the specific card issuer and the terms and conditions of each individual card.