A charge card is similar to a credit card, except the balance is due in full each month. So basically any purchases made with a charge card will be due within 30 days of the closing statement for each month, just like an installment credit card.
It differs greatly from a credit card because you can’t carry a balance, and there is no interest rate because the balance is always due at the end of the month. Most credit cards are revolving accounts, meaning you can pay a minimum payment each month and carry a balance, or alternatively pay the balance in full.
With a charge card you have little choice but to pay the full balance each month or risk being hit with a late fee, which can be quite severe. Many late fees on charge cards can be as high as 5% of the balance. Even if you make a partial payment you will be hit with late charges and could ultimately have the card account closed.
The most popular charge card available is offered by American Express. Most American Express cards are charge cards that require the full balance to be paid off each month. American Express charge cards are simply a means of using plastic instead of cash for the sake of simplicity and convenience, with the added benefits of security and a rewards program.
American Express did launch the American Express Blue card in recent years which is a revolving credit card, allowing card members to carry a balance and make minimum payments with all the usual benefits and rewards of an American Express card.
Diners Club and high-end retailer Neiman Marcus are among other companies that offer charge cards.
I personally favor a revolving credit card that gives you the freedom to carry a balance if need be. You can still pay off the entire balance each month, but if you’re short one month or simply want to pay the minimum, you have that freedom.
Many large corporations use charge cards as a means of tracking their expenditures while avoiding any interest fees.
