Charge Card

A lot of people think the terms credit card and charge card are one and the same, but there are quite a few differences.  Generally, credit cards let you make purchases for which you are billed at a later time.  Most credit cards allow you to carry a balance from one month to the next; although, you will have interest on that balance.  Most of the time, you have to pay at least a minimum part of your balance every time you receive a bill.  Charge cards are a special kind of credit card.  Your balance on a charge card account is paid in full when the bill is accepted and will not be rolled over from one bill to the next.  Because it won’t let you carry a balance, a charge card does not have a periodic or APR, so there is not a rate for a charge card issuer to disclose.

To ensure that consumers get uniform disclosure of rates and other information related to credit and charge card accounts, Congress passed the Fair Credit and Charge Card Disclosure Act in 1988.  To enforce the law, the Federal Reserve amended its Truth in Lending regulation.  Truth in Lending is set up to help the consumers see the cost and terms of credit.  This regulation requires credit and charge card issuers to display their bills, so consumers can shop for the credit terms that work best for them.  This brochure tells most of the features of the regulation.  The regulation always required credit card and charge card companies to show consumers things like the interest rate charged for credit, but the information is not always easy for some people to find.

Charge Cards - Apply online

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All credit and charge card companies must provide all their billing statements with easy to read headings and a toll free number, so they can be reached for any questions concerning the bill.  This information is designed to make the understanding of the bill easy and painless.

Truth in lending makes sure companies provide this information earlier than they did in the past.  Now, you are able to find out what a credit card will cost you before you are charged any fees.  If a company takes your application over the phone and there is a fee involved in the issuance of the card, the company must let you know then and there.  If there is no fee, or there is no fee until the card is actually used, then the issuer is allowed to mail the information to you instead of giving it to you over the phone.  They also must deliver that information to you within a 30-day period, but they cannot give it to you later than the issuance of the card.

When you are applying for a credit or charge card, the card issuer must either tell you directly, in table form with headings, or he has to tell you how you can obtain certain information.  You must be told the APR for purchases made on credit cards, how the APR is figured if it’s a variable rate, and what the issuer uses to compute your balance for purchases against which the finance charge is applied.  You must also be informed how they calculate an average balance, the amount of minimum finance charge, any transaction fee for purchases, whether a certain dollar amount or percentage fee exists, and any fees for cash advances and fees for late payment or exceeding the credit limit.  The new legislation also helps consumers understand the amount of the annual fee that you will be charged and when charges made to a charge card are due and payable.