Understanding Charge Cards and Debit Cards
A charge card looks like a credit card and can be used similarly, but you must pay the balance in full each month. You won’t carry a balance or pay interest.
Many charge cards don’t have spending limits. Banks check your credit before approving a charge card. They don’t check credit for debit cards, just your bank account funds.
Debit Card Transactions
Debit cards deduct purchases directly from your checking account. You see these transactions immediately on your statement.
Usage in Business and Personal Finance
Businesses often use charge cards. Debit cards help individuals easily manage spending by allowing them to spend only what’s deposited. Charge cards offer services like purchase insurance.
While they look similar, charge cards have 15-digit numbers; debit cards have 16-digit numbers. Both require PINs. All enable convenient spending while avoiding carrying cash.
Making Informed Financial Decisions
Informed financial decisions require understanding differences between card types like credit, debit, prepaid and charge cards. Each has pros and cons regarding accessibility, ease of use, credit impact, fees, perks and limits. Picking the right one depends on your needs.
What type of card is a charge card?
A charge card is a type of credit card that enables the cardholder to make purchases which are paid for by the card issuer, to whom the cardholder becomes indebted. The cardholder is obligated to repay the debt to the card issuer in full by the due date, usually on a monthly basis, or be subject to late fees and restrictions on further card use.
Charge cards are typically issued without spending limits, whereas credit cards usually have a specified credit limit that the cardholder may not exceed. A charge card is defined as a card that charges no interest but requires the user to pay his/her balance in full upon receipt of the statement.
Charge cards don’t have predefined credit limits. As a result, you may benefit from a higher purchasing power when you sign up for a charge card. However, no credit limit doesn’t mean you can spend unlimited money on a charge card.
Explore what charge cards are, how they differ from credit cards, and how to decide which type of card is best for you with these tips. If you fall under that category, getting a charge card can help if you’re looking to avoid paying interest, need to spend a large amount, want to earn generous rewards, or give a boost to certain factors that make up your credit score.
Is a debit card a type of charge?
No. Debit cards deduct purchases from your checking account. Charge cards let you buy on credit paid monthly. Charge cards don’t have preset spending limits. Debit cards limit spending to account balances. Charge cards have 15-digit numbers; debit cards have 16-digits. Both need PINs. But credit and charge cards allow debt accumulation. That isn’t good for anyone who sometimes carries debt long term.