January 31,2007
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Charge! (...Or Not)
Many people use the terms "credit card" and "charge card" interchangeably, only to be slightly miffed when they discover that, in fact, the two are quite different! A charge card requires you to pay off the entire balance by the due date from month to month – no carrying over a balance. American Express issues many charge cards, for example. While the downside to this payment schedule is obvious, the benefit is real for the financially impeccable and those with self-control – all the access and perks of plastic (including rewards), with none of the interest of credit.
Cards that do allow you to carry a revolving balance are credit cards, and these are most likely what is in your wallet. Credit cards give borrowers a line of credit which can be borrowed against, with an interest rate charged on any carried-over balance, so you can pay things off over time. Used properly, this feature of credit cards is great for when you run into a situation you couldn't have financially handled otherwise, such as an appliance breaking down or a costly car repair – it's a glorified payment plan. When used improperly... well, we all know that tune!