Charge Cards versus Credit Cards

I remember one of the first things about money I remember learning from my father was that there was a difference between charge cards and credit cards. I don’t know why this has always stayed with me, but it has. And everyone now and then I will hear the words charge card and credit card being used interchangeably – but there is a difference between the two.

Everyone is familiar with credit cards – they are fairly ubiquitous. I’ll instead point out the main difference of a charge card from a credit card: a charge card is meant to be paid off in full every month. They originated as early as the 1890’s according to some articles I’ve read. They were normally used by merchants for their customers as a way of allowing them to make purchases more easily "on the spot" and then pay at the end of the month. Back then the charge cards could only be used at one place – of course these, days you can use them at many different merchants.

Instead of charging you interest on carrying a balance, if you do happen to carry a balance the term more commonly used is Annual Penalty Interest Rate – and it may be around 30%. So it is possible to carry a balance, but the penalties are quite stiff. American Express is probably the most recognized issuer of charge cards. VISA and MasterCard are credit card issuers.