Credit and Charge Cards
What Consumers Should Know about the Cost and Terms of Credit
Using credit and charge cards to pay for purchases is a fact of life for consum-ers today. Many people have at
least one credit card, if not more than one card.
Applications and solicitations for credit and charge cards are readily available. You may find them in “take-
one” racks in stores and restaurants, in some magazines or catalogs, or in your mail at home, even if you
haven’t asked for an application.
Credit Cards vs. Charge Cards
Many people use the terms credit card and charge card interchangeably, but there are important differences. In
general, a credit card lets you make purchases for which you are billed later. Most credit card accounts allow
you to carry a balance from one billing cycle to the next; however, you have to pay interest on that balance.
Usually, you have to pay at least a certain amount of your balance each time you receive a bill.
A charge card is a specific kind of credit card. The balance on a charge card account is payable in full when the
statement is received and cannot be rolled over from one billing to the next. Because you cannot carry a
balance, a charge card doesn’t have a periodic or annual percentage rate, so there is no rate for a charge card
issuer to disclose.
To make sure that consumers receive detailed and uniform disclosures of rates and other cost information
related to credit and charge card accounts, Congress passed the Fair Credit and Charge Card Disclosure Act in
1988. To implement the law, the Federal Reserve amended its Truth in Lending regulation (Regulation Z).
Truth in Lending is designed to help consumers know the cost and terms of credit. The regulation requires
credit and charge card issuers to reveal important information in a clear, easy-to-read, and easy-to-compare
manner so that consumers can shop for the credit terms that work best for them. This pamphlet summarizes
some of the major features of th