Charge card
Encyclopedia
A charge card is a card that provides an alternative payment to cash when making purchases in which the issuer and the cardholder enter into an agreement that the debt incurred on the charge account will be paid in full and by due date (usually every thirty days) or be subject to severe late fees and restrictions on card use.
Though the terms charge card and credit card
are sometimes used interchangeably, they are distinct protocols of financial transactions: a credit card is a revolving credit
instrument that does not need to be paid in full; no late fee is charged so long as the minimum payment is made at specified intervals (usually every thirty days) which carries the balance
forward as a loan charging interest. Charge cards are typically issued without spending limits (although one may be punished after a late payment), whereas credit cards always have a specified line of credit that the user may not exceed for purchases.
offered the first charge card, which was printed on paper, for consumers. In 1959, American Express
was the first company to issue embossed plastic charge cards.
In Europe, however, the MasterCard-affiliated Maestro
brand (which is a debit card
rather than a charge card) replaced the European Eurocheque
brand for payment cards in 2002. Many Eurocheque cards, particularly in such countries as Austria
and Germany
, were charge cards branded with the Eurocheque
symbol. In addition, the European Eurocard
, issued as the competitor for American Express
was, and in some countries (such as the Nordic countries
) still is, a charge card. Therefore, the majority of MasterCards in these countries still are charge cards. Visa charge cards are also available in Europe.
charge card customers, for instance, can enroll in the Extended Payment Option (internally referred to as ExPO) to be able to pay for purchases over $200 over time, or in Sign & Travel to be able to pay for eligible travel-related expenses over time.
Most charge cards also have a feature called No Preset Spending Limit (NPSL). While consumers often take NPSL to mean that their cards are without limits, NPSL really means that a card’s limit changes, often from month-to-month, based on factors such as consumer charging and payment history as well overall economic trends. According to a CardHub.com
NPSL study, the way NPSL charge cards are reported to the major credit bureaus varies by issuer and can lead to artificial increases in credit utilization, thereby lowering one’s FICO Score.
Government
s and large business
es often use charge cards to pay for and keep track of expenses related to official business; these are often referred to as purchasing card
s. Some high-end retailers like Neiman Marcus
issue charge cards to customers. Some American Express
and Diners Club
cards are also charge cards, rather than credit or debit card
s like VISA
and MasterCard
.
Though the terms charge card and credit card
Credit card
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services...
are sometimes used interchangeably, they are distinct protocols of financial transactions: a credit card is a revolving credit
Revolving credit
Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. Examples of revolving credits used by consumers include credit cards. Corporate revolving credit facilities are typically used to provide liquidity for a company's day-to-day...
instrument that does not need to be paid in full; no late fee is charged so long as the minimum payment is made at specified intervals (usually every thirty days) which carries the balance
Balance (accounting)
In banking and accountancy, the outstanding balance is the amount of money owed, , that remains in a deposit account at a given date, after all past remittances, payments and withdrawal have been accounted for. It can be positive or negative ....
forward as a loan charging interest. Charge cards are typically issued without spending limits (although one may be punished after a late payment), whereas credit cards always have a specified line of credit that the user may not exceed for purchases.
History
In 1914, Western UnionWestern Union
The Western Union Company is a financial services and communications company based in the United States. Its North American headquarters is in Englewood, Colorado. Up until 2006, Western Union was the best-known U.S...
offered the first charge card, which was printed on paper, for consumers. In 1959, American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
was the first company to issue embossed plastic charge cards.
In Europe, however, the MasterCard-affiliated Maestro
Maestro (debit card)
Maestro is a multi-national debit card service owned by MasterCard, and was founded in 1990. Maestro cards are obtained from associate banks and can be linked to the card holder's current account, or they can be prepaid cards...
brand (which is a debit card
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
rather than a charge card) replaced the European Eurocheque
EUROCARD (payment card)
Eurocard was a credit card, introduced in 1964 by a Swedish banker in the Wallenberg family as an alternative to American Express.-History:In 1965, Eurocard International N.V. was established, based in Brussels, as a not-for-profit membership association of European banks. Its operational entity...
brand for payment cards in 2002. Many Eurocheque cards, particularly in such countries as Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
and Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, were charge cards branded with the Eurocheque
Eurocheque
The Eurocheque was a type of cheque used in Europe that was accepted across national borders and which could be written in a variety of currencies....
symbol. In addition, the European Eurocard
EUROCARD (payment card)
Eurocard was a credit card, introduced in 1964 by a Swedish banker in the Wallenberg family as an alternative to American Express.-History:In 1965, Eurocard International N.V. was established, based in Brussels, as a not-for-profit membership association of European banks. Its operational entity...
, issued as the competitor for American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
was, and in some countries (such as the Nordic countries
Nordic countries
The Nordic countries make up a region in Northern Europe and the North Atlantic which consists of Denmark, Finland, Iceland, Norway and Sweden and their associated territories, the Faroe Islands, Greenland and Åland...
) still is, a charge card. Therefore, the majority of MasterCards in these countries still are charge cards. Visa charge cards are also available in Europe.
Operation
Many charge cards have the option for users to pay for some purchases over time. American ExpressAmerican Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
charge card customers, for instance, can enroll in the Extended Payment Option (internally referred to as ExPO) to be able to pay for purchases over $200 over time, or in Sign & Travel to be able to pay for eligible travel-related expenses over time.
Most charge cards also have a feature called No Preset Spending Limit (NPSL). While consumers often take NPSL to mean that their cards are without limits, NPSL really means that a card’s limit changes, often from month-to-month, based on factors such as consumer charging and payment history as well overall economic trends. According to a CardHub.com
CardHub.com
CardHub.com is a credit card comparison website owned and operated by Evolution Finance, Inc., a personal finance company founded in 2008 and based in Arlington, Virginia in the United States....
NPSL study, the way NPSL charge cards are reported to the major credit bureaus varies by issuer and can lead to artificial increases in credit utilization, thereby lowering one’s FICO Score.
Government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
s and large business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
es often use charge cards to pay for and keep track of expenses related to official business; these are often referred to as purchasing card
Purchasing card
A purchasing card is a form of company charge card that allows goods and services to be procured without utilising a traditional purchasing process...
s. Some high-end retailers like Neiman Marcus
Neiman Marcus
Neiman Marcus, formerly Neiman-Marcus, is a luxury specialty retail department store operated by the Neiman Marcus Group in the United States. The company is headquartered in the One Marcus Square building in Downtown Dallas, Texas, and competes with other department stores such as Saks Fifth...
issue charge cards to customers. Some American Express
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
and Diners Club
Diners Club
Diners Club International, founded as Diners Club, is a charge card company formed in 1950 by Frank X. McNamara, Ralph Schneider and Matty Simmons...
cards are also charge cards, rather than credit or debit card
Debit card
A debit card is a plastic card that provides the cardholder electronic access to his or her bank account/s at a financial institution...
s like VISA
VISA (credit card)
Visa Inc. is an American multinational financial services corporation headquartered on 595 Market Street, Financial District in San Francisco, California, United States, although much of the company's staff is based in Foster City, California. It facilitates electronic funds transfers throughout...
and MasterCard
MasterCard
Mastercard Incorporated or MasterCard Worldwide is an American multinational financial services corporation with its headquarters in the MasterCard International Global Headquarters, Purchase, Harrison, New York, United States...
.