Chapter 4, Problem 16AA

To determine

To Discuss: The difference between a charge account and a credit account

Explanation of Solution

Difference between charge account and credit card are as below:

• Charge Cards are better for individuals who have means to pay off the credit balance every month. They are more expensive then credit card
• Credit card gives cardholder more flexibility over how much of their balance is due and they pay off each month
• Charge card does not have a present spending limit.
• On other hand credit cars has a present spending limit.
• In Charge card, if the monthly bill is not paid fully then it will be charged as late fees.
• In credit card, issuers also charge late fees but it can be avoided by paying some minimum amount on time.

Description	Credit Card	Charge Card
Present Spending Limit	Yes	No
Requires to pay bill n full month	Yes	No ( but there has to be at least minimum payment)
Has an annual fee	Yes (depends on card)	Yes (depends on card)

Economics Concept Introduction

Introduction:

A Charge Account is a credit arrangement in which a customer receives or purchase goods and service before making a payment. In other terms charge account permits customer to buy goods and the amount will be billed for later date.

A Credit Card is a type of a payment card and it is a most common way to access the line of credit. It is usually issued by the bank or financial company, credit card allows account holders to make purchase on credit. The charges accrue as a balance that must be paid off on a monthly period of billing cycle.