UK Accounting Glossary
A charge card is a physical card that records an account number of a buyer in a retail payment system. In a charge card transaction, the buyer presents the charge card to a merchant, the charge card issuer guarantees the merchant will be paid for the authorized transaction, and the cardholder receives an invoice from the charge card issuer. Although the term charge card is often used interchangeably with the term credit card, a charge card is different from a credit card in that the invoice must be paid in full each month. (Credit issued is therefore for one month at most.) The leading brand of charge card in the US is American Express, issued solely by the financial services firm of the same name. American Express is also a credit card issuer. Businesses often issue a charge card to employees for business expenses. Part of the services of the charge card issuer to the company is assistance tracking and controlling employee purchases.
A Charge Card is your not-so-flexible friend! A Charge Card may look like a credit card, feel like a credit card and you can spend money with it like a credit card. But, unlike a credit card, the day of reckoning comes each month.
Charge card accounts insist that you must settle the debt in full each month. Most charge card operators will operate penalty interest charges which are significantly higher than credit card interest rates for failure to pay.
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This glossary post was last updated: 4th February 2020.