Charge cards are the older of the two. They were born back in the 1940’s when banks were looking for new ways to attract customers (depositors). Credit cards are the newer sibling. They took their first breath in the 1950’s when the concept of the “revolving balance” was born.

In short, you can make a purchase with either product but your payback terms are different.

With a charge card, you must pay back your entire balance at the end of your grace period. That usually means at the end of the month. With a credit card, you have the option of paying back your entire balance or just a portion of it. However, if you choose to pay back just a portion, you’ll be charged a fee (aka interest). So over time, purchases made with a credit card and paid off in installments will cost you more real money.

Charge cards are useful in certain business situations where expenses and purchases need to be tracked. The revolving balance credit card can be used in the same way but also gives the business or individual more options with how they spend.

Be careful with credit cards though because while the credit card owner has more spending options, the bank also has more billing and charging options. That can make credit card terms more difficult to understand which can lead to poor management of your credit and ultimately higher expenses and debt.

Did you know that there’s a great alternative to traditional credit cards? They’re called prepaid debit cards and to learn more about them, click here.