The difference between a charge card and a credit card is a big one—the way they work. Think of an alarm clock. With a charge card, you have no choice but to wake up—and pay up—completely. But a credit card comes with a "snooze button." If there's a reason you can't pay in full, you can make a minimum payment and pay your balance over time.

Charge cards get paid back in full

When you use a charge card to make purchases, you have to pay back all the money you've spent by the due date, usually every month.

Remember, no snooze button. You're not allowed to stretch your payments out from one month to the next. And if you don't pay that balance in full? You may be charged a penalty fee.

Credit cards give you flexibility

A credit card gives you the choice to either pay your monthly balance in full or pay it back over time instead. That can come in handy if an unexpected expense comes up during the month, like car repairs or a medical emergency.

But that flexibility also comes with responsibility. If you decide to pay over time, your credit card company will add interest to what you owe. That's the price you pay for borrowing money, and the amount is determined by your card's interest rate.

Paying it off pays

Whether you use a charge card or a credit card, paying off your total monthly balance every month on time can help you improve your credit score, a rating used by banks to determine your interest rate for future loans and credit cards.

So the next time you're out shopping or at a restaurant and you overhear someone say "charge it," that may not be exactly what they mean. Now you know why and can choose which kind of card is better for you.

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