Charge cards let you pay with plastic but must be paid off each month. Paying your charge card balance in full every month as agreed can have a positive effect on your credit score over time.
Definition
While a charge card looks similar to a credit card, there are some important differences in the way they work. With few exceptions, charge cards do not allow you to carry a balance over time. Instead, you must pay your entire bill each month. Charge cards usually don't have a credit limit, either.
Credit Score Impact
According to FICO, one of the major credit score companies, fully 30 percent of your credit score is determined by the amount of money you owe to creditors, particularly in proportion to the amount of credit that is available to you. With a charge card, you aren't carrying a balance from month to month, so you aren't increasing your debt in proportion to your available credit. This can have a positive effect on your credit score, although perhaps not as positive as routinely paying off a credit card with a revolving balance.
Warning
Charge card companies report late or missed payments to credit bureaus, which then show up as delinquencies on your credit report. Late payments, even just one or two, can hurt your credit score.
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