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Charge Card
The charge card is the modern equivalent of the old-fashioned monthly credit account. It is now generally called a charging account and is operated by many of the big department stores. In essence the system is very similar to that of Access or Barclaycard. The shop provides the customer with a charge card (after having checked the customer's credit status) and this card can be used in that shop only almost exactly as with Access or Barclaycard. The customer gets about a month's free credit; for extended credit repayable by monthly instalments he pays interest. Rates of interest ranged in 2012 from 1.75% to 2.5% per month on the outstanding balance, so the true rate of interest lay between 25.3% and 30.6% per annum. You are generally required to make a minimum monthly payment of 5% of the balance or £5, whichever is the higher.
Personal finance Example
Total purchases in month (Minimum payment to be made 200
within the stipulated period is £10.)
Balance brought forward 200
First monthly payment 30
Balance outstanding 170
add Interest at 2% 3.40
Balance 173.40
(The next minimum monthly payment will be £8.67, being 5% of £173.40.)
A person buying goods by this method becomes the owner of the goods as soon as he obtains possession.
Credit Cards
Using a consumer credit card such as Access or Barclaycard is very similar in its consequences to buying on simple credit. With a credit card you purchase the article at the marked retail price, but instead of paying for it there and then you present your card and sign a special sales voucher. All your purchases during a month are billed to you by the credit card company the following month. If you pay within 25 days of the date of the statement you are, in effect, getting free credit for a short period. If you prefer to take extended credit you can pay off the amount in monthly instalments of not less... see: Credit Cards