Before there were credit cards there were charge cards. Charge cards are essentially short-terms loans that have to be repaid quickly, usually in about a month. Charge cards require that the entire balance be paid in full at the time payment is due.
Charge cards are often issued by retailers for purchases made in their stores. Bloomingdale’s offers customers charge cards, for example. So if you get a Bloomingdale’s charge card with a limit of $1,000, and over the course of a month you spend $700 of that limit, you will have to pay the entire balance of $700 at the end of the month. With a charge card, there is no such thing as the “minimum monthly payment.” Because of this charge cards do not charge interest on their balances. However, charge cards will penalize with a late fee and the penalty is often quite stiff, since very often it is a percentage of your balance. The higher the balance, therefore, the higher the late-payment fee. The same kind of fee can also be invoked if there is only a partial payment made on the charge card balance. Bear in mind, however, that many charge cards do offer a partial payment plan. The American Express card, which is well-known as one of the first charge cards, does allow its members to enroll in an extended credit payment option.
Charge cards are very good alternatives to credit cards because they force their members to live within their means. You have to pay back the balance every month, so there’s no way it can pile up and become something you can’t deal with. If you fail to make your charge card payments the card will be canceled.
To learn more about charge cards, credit cards, American Express, or any other topic concerning charge cards, be sure to consult with a financial professional. A charge card may be the right credit option for your needs.
Editorial Note: This content is not provided by American Express. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone and have not been endorsed by American Express.