What Is a Charge Card?

A charge card is a type of payment card with no spending limit but requires the cardholder to pay off the balance in full each month. Also, charge cards do not charge interest, unlike credit cards. However, charge cards impose a fee, which might b💖e a percentage of the unpaid balance if you don't pay off the card each month. Charge cards offer generous rewards and points but typically charge a high annual fee.

Charge💧 cards are increasingly rare, but some credit card issuers offer hybrid charge cards with credit card 🎀features that allow you to carry a balance for a short period like 60 days. Discover the pros and cons of charge cards, how they differ from credit cards, and how their rewards and benefits can save you money.

How a Charge Card Works

A charge card is a branded card ava⛄ilable for use anywhere the brand is accepted for electronic payment. Charge cards have similar features to credit cards, but there are distinct differences.

Unlike credit cards, charge cards allow unlimited spending and don't charge interest. However, charge cards must be paid in full each month, which can limit their use. With both credit and charge cards, missed payments get reported to 澳洲幸运5官方开奖结果体彩网:credit bureaus and can substantially affect your 澳洲幸运5官方开奖结果体彩网:credit score. Your credit score is a personal 澳洲幸运5官方开奖结果体彩网:credit rating that represents your 澳洲幸运5官方开奖结果体彩网:creditworthiness and ability to make on-time payments and effectively manage your debts.

Although charge cards allow for flexibility with your spending due to no credit limits, the late fees for missed payments or failure to pay off the balance can be costly. Some cards charge a flat fee while others charge a percentage of the unpaid balance. For late payments, charge cards may charge a penalty 澳洲幸运5官方开奖结果体彩网:annual percentage rate (APR) of nearly 30%, which remains on your account for six months.

Example of a Charge Card

Pure charge cards are rare since they've been replaced by credit cards. However, 澳洲幸运5官方开奖结果体彩网:American Express still offers various charge cards with no pre-set spending limi𒁏t and high levels of rewards points. Some of these cards have no annual fee, while the Gold and Platinum cards have an annual fee of $395 to $695 respectively with late payment penaltie♚s.

Even 澳洲幸运5官方开奖结果体彩网:American Express cards are not "true" charge cards because they offer a "Pay Over Time" feature that permits customers a few months of interest-free credit. The company also offers a "Plan It" feature, which allows you to split large purchases into monthly installments for a fee. However, both programs have limits, and any charges over those limits must be repaid by the end of the month.

Some charge cards give you the option of paying in full every month or carrying your balance for up to 60 days without paying interest as long as you make the minimum payment due.

Charge Card vs. Credit Card

Charge cards and credit cards share similar features, but there are distinct differences between the t🌜wo financial products.

Interest

Credit card: You can buy and pay off the balance later, but you're charged interest on the unpaid balance. As long as you make the minimum monthly payment, you can allow the debt to remain on the card.

Charge card: Ch꧑arge cards do not charge interest, as long as you repay the balance in full within the month or a specified ti🦂me.

Spending Limit

Credit card: Credit cards come with a spending limit or credit limit. Some cards allow you to spend beyond the credit limit but charge an overlimit fee. However, credit cards typically don't allow you to spend too far over the card's credit limit.

Charge card: There are no pre-set spending limits with charge cards, allowing you to customize the card to your spending patterns. The flexibility of charge cards can be a valuable feature for business travelers with variable monthly travel and entertainment expenses.♑

Fees

Credit card: Credit cards may charge fees, including late fees and annual fees. If you're consistently late with your payments, the card company may increase the interest or annual percentage rate (APR) they charge you.

Charge card: Charge cards may impose higher fees than credit cards if you miss the payment due date or do not repay the balance in full by the deadline. For example, a charge card may charge a percentage of the unpaid balance as a fee. Some cards charge a penalty APR of nearly 30% if you miss a payment. The penalty APR may remain for six months.

A charge card can be more cost-effective than a credit card if you can pay off the balance each month. However, if you miss a payment, your credit score will take a hit, and the fees can be high and add up quickly.

Charge cards are also popular because of their travel-related rewards and benefits, oftentimes more generous than typical rewards credit ဣcards. Cardholders can earn points and statement credits with their purchases, often with double aꦦnd triple points on dining and travel expenses.

Card issuers offer cardholders exposure to a wide variety of standard items, luxury brands, and travel deals that can be purchased with points accumulated from a charge card.

How to Apply for a Charge Card

Applying for a charge card is similar to applying for a 澳洲幸运5官方开奖结果体彩网:credit card. Many card issuers offer an online application, which can take less than an hour to complete and a credit decision within minutes. Typically, the lender's decision on whether to approve your application will be impacted by your income and 澳洲幸运5官方开奖结果体彩网:credit score.

When applying for a charge card, the creditor may ask for the following information:

• Your name
• Date of birth
• Social Security number
• Mother's maiden name
• Monthly housing payments, such as your mortgage or rent payment
• Other debt payments
• Employment status
• Income
• Contact information, including phone number, address, and email

Card companies use your Social Security number to check your creditby performing a 澳洲幸运5官方开奖结果体彩网:hard inquiry, which is when creditors pull a copy of your credit report. During a hard inquiry, a creditor views your credit history, including if you have any late payments, your total amount of outstanding debt, and the number of open accounts. Hard inquiries can trim a few points off your credit score, so it's best to limit the number of charge card applications to minimize the impact. 

After submitting the application, the card company will review your details and either approve or 澳洲幸运5官方开奖结果体彩网:decline your application. If approved, you will need to wait to receive the credit card in the mail. However, some card companies offer a digital card number to use for purchases online. 

Pros and Cons of Charge Cards

Because charge cards do not have a set spending limit,🍒 you can charge an unlimited number of purchases to your card. However, the downside is that you need to pay the balance in full every month otherwise, charge cards generally levy stiff fees and penalties on unpaid balances.

From a financial perspective, charge cards pose little danger to your financial well-being if you pay the balance. They discourage or make it impossible to carry a balance, so the temptation to buy what you can't afford or accumulate debt is minimized.

Charge cards typically include a high annual fee of up to $500. Despite the annual fee, some consumers prefer charge cards because they avoid the interest-related expenses of using a credit card. Interest rates charged by credit cards 澳洲幸运5官方开奖结果体彩网:are typically high.

Though many credit cards offer awards and perks, charge cards tend to offer more lucrative rewards and can be a good option for business travel.

The Bottom Line

A charge card is a type of electronic payment card. It is somewhat similar to a credit card, but there are some key differences. Charge cards have no interest but require you to pay the statement balance in full, usually monthly. Charge cards have an uncapped spending limit with generous reward benefits for the cardholder but typically charge a high annual fee. Charge cards are increasingly rare, and few lenders offer "true" charge cards.