Defined Terms and Documents       

Charge Card means a small rectangular plastic card that -

(i)         enables the 'Charge Cardholder' to Purchase goods and services; and

(ii)        requires the 'Charge Cardholder' to repay the 'Charge Card Issuer' the accrued 'Outstanding Amount' each monthly billing cycle by the statement due date, or be subject to severe late fees and restrictions on future card use.

Australia's first Credit Card was Bankcard which launched in 1974.  Before 1974, only store cards, Diners Club and American Express were available in Australia and these were either restrictive or only accessible to the wealthy. 

Unlike Credit Cards, which give Credit Cardholders a 'revolving' Line Of Credit that can be accessed and paid down over time, a Charge Card does not allow the Outstanding Indebtedness to be carried forward and do not charge an interest rate.  Rather Charge Card providers rely on an annual issuance fee for their revenue stream.

Early general purpose charge cards: Diners Club, Carte Blanche, and American Express

The concept of customers paying different merchants using the same card was expanded in 1950 by Ralph Schneider and Frank McNamara, founders of Diners Club, to consolidate multiple cards. The Diners Club, which was created partially through a merger with Dine and Sign, produced the first "general purpose" charge card and required the entire bill to be paid with each statement. That was followed by Carte Blanche and in 1958 by American Express which created a worldwide credit card network (although these were initially charge cards that later acquired credit card features).

American Express began as a Charge Card provider and continues to offer these types of products (e.g. Green, Gold and Platinum American Express cards), in addition to also offering Credit Cards.

Though the terms Charge Card and Credit Card are sometimes used interchangeably, they entail distinct protocols of financial transactions:

• A Credit Card is a revolving credit instrument that does not need to be paid in full; no late fee is charged so long as the minimum payment is made at specified intervals (usually every 30 days) which carries the balance forward as a loan charging interest.

• A Charge Card is typically issued without spending limits (although one may be punished after a late payment), whereas Credit Cards always have a specified Line Of Credit that the user may not exceed for Purchases.

Many Charge Cards have the option for users to pay for some purchases over time.  American Express Charge Card customers, for instance, can enrol in the Extended Payment Option (internally referred to as ExPO) to be able to pay for purchases over $200 over time, or in Sign & Travel to be able to pay for eligible travel-related expenses over time.

Most Charge Cards also have a feature called No Preset Spending Limit (NPSL).  While consumers often take NPSL to mean that their cards are without limits, NPSL really means that a card’s limit changes, often from month-to-month, based on factors such as consumer charging and payment history as well overall economic trends. According to a CardHub.com NPSL study, the way NPSL Credit Cards are reported to the major credit bureaus varies by issuer and can lead to artificial increases in credit utilization, thereby lowering one’s FICO Score.

Governments and large businesses often use Credit Cards to pay for and keep track of expenses related to official business; these are often referred to as purchasing cards.  Some high-end retailers like Neiman Marcus issue Credit Cards to customers.  Some American Express and Diners Club cards are also Credit Cards, rather than credit or Debit Card like VISA and MasterCard.

 If you are wondering why credit cards extended towards corporates are so small relative to households, it is because charge cards are generally extended towards the corporate segment. Balances on the charge cards are due by the statement date and cannot accumulate over time like credit cards.

The Difference Between Charge and Credit Cards.