Charge cards let holders use them to make purchases, then at the end of the statement period, they are required to pay the balance, which is typically done on a monthly basis. There is no revolving credit (a balance can’t be carried from month to month and must be paid in full), there is also no pre-set limit.

With a charge card, you get all the security and convenience of a credit card, but without the risk of going into debt and without having to pay finance charges.

Charge cards also give some features that give consumers a bit of financial discipline when they are new to credit.

While late payments incur fees and charges, since there is no revolving credit, with a charge card, you don’t have to worry about APRs or finance charges. Business owners are also given extra rewards such as American Express’s “extended payment option” for equipment purchases or travel expenses. With this “reward”, finance charges are applied to balances associated with these transactions. They can also defer payment for 2 months.

So, why bother with a charge card? Being required to pay balances is a great incentive to keep spending in check while enjoying the convenience of plastic. But consider all features and your planned purposes before signing up for a new card.

Charge Card Summary

Essential features:

* No finance charges
* Balances must be paid monthly or every statement cycle
* No funds are automatically taken from bank account*

Typical features:

* No pre-defined spending limit
* Late charges billed for late payments*

Possible features

* No annual fee*
* Discounts on certain products or services*
* Specialized insurance (such as travel insurance)*

*These features may also be found in a credit card.

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