What is a Charge Card?

Credit Cards and Debit Cards use the same networks. In fact, the first cards were issued by major lenders and then these networks were used by banks when they began issuing cards to slowly replace personal written checks. Credit cards and their debit cousins are an essential part of modern spending, since they can be easily swiped and replace the need to handle money.

For that matter, credit cards can be used to make purchases with many online stores. Prior to the internet, most consumers practiced remote shopping by receiving order catalogs in the mail and then looking at products by flipping actual paper pages. Once a product was selected, it was then ordered either by filling a paper form or by making a phone call with a landline. While many orders involved paper checks, larger companies simply collected bank account numbers and automatically billed customers according to their bank account information.

Surprisingly, catalogs and checks still exist, but nearly all businesses accept credit cards and debit cards these days. Only small businesses do not accept cards, and card reader can now be purchased for smart phones. For better or worse, pieces of plastic have largely replaced checks and cash, and the convenience will only become more widespread over time.

Imagine having to carry hundreds of dollars of cash whenever large purchases are made. It is inconvenient to carry a large wad of cash, and in the past, it might have been very unsafe. Even in modern times, people would much rather prefer an alternative to carrying large sums of cash. Checks were the original solution for personal safety needs, and cards have followed suit. Since cards cannot bounce, they are the preferred solution.

Credit cards have the advantage of providing access to funds if a consumer is largely living paycheck to paycheck. It is a bad idea to live outside personal means, but sometimes a large purchase is a strategic decision with benefits that far outweigh the pitfalls. Credit cards are convenient because they avoid filing for personal loans. Personal loans are only preferable where the purchase exceeds a few thousand dollars, and some sort of open line of credit is the middle solution.

The obvious pitfall of credit cards is a relatively high interest rate, and many consumers end paying their convenient loans at the same pace as personal loans. Many credit cards have penalty interest rates for people who miss more than one payment, and so this type of lending might be compared to a mousetrap.

In spite of the dangers, consumers are enticed to use credit because of a variety of incentives. Most cards offer 30-day grace periods where interest does not accrue. They also might offer cashback and air mileage bonuses. These benefits might be paid through the interest rate. This is the main reason why most people still use debit cards. It is smarter in the long run to use cash, and it is no wonder that credit cards are both easy to use and offer enticements. Reaping the benefits without paying for them requires meticulous payments.