American Express charge card

A charge card is a means of obtaining a very short term (usually around 1 month) loan for a purchase. It is similar to a Credit Card, except that the contract with the card issuer requires that the card holder must each month pay charges made to it in full - there is no "minimum payment" other than the full balance. Since there is no loan, there is no official interest. A partial payment (or no payment) results in a severe late fee (as much as 5% of the balance) and the possible restriction of future transactions or even cancellation of the card.

In contrast, a credit card is a revolving Credit instrument which does not need to be paid off in full; no late fee is charged as long as the minimum payment is made, which carries a balance forward as a loan charging interest. Many people are not aware of this distinction however, and often the two terms are used interchangeably to describe any card which can be used as payment.

Governments and large businesses often use charge cards to pay and keep track of expenses. 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 Cards like VISA and MasterCard.


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