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Is a Zero-Interest Charge Card Too Good to Be True?

Q. I received a mail offer for a zero percent charge card. So what’s the catch?

A. Many folks use the terms “credit cards” and “charge cards” interchangeably, but they are different things. Unlike a credit card, a charge card must be paid in full each month.

So that zero percent rate is marketing hype—by definition all charge cards are zero percent, because there’s no balance to pay interest on. But be prepared for hefty fees and penalties if you miss your payment date. Issuers also take in money by charging annual fees and by taking a small percentage of each purchase.

Charge cards don’t have preset spending limits. Rather, your levels are set by the issuer based on spending and payment history. The cards also typically provide generous rewards, such as one point for each dollar spent and two or three points in certain categories. Some also provide travel discount and insurance benefits.

Annual fees can be steep. For instance, American Express, the leader in this niche, charges $450 a year for its multi-benefit Platinum charge card (but only $25 annually for its new Zync charge card).

Charge cards are usually issued to people with the best credit scores and credit histories, and if you’re among them, expect more solicitations. Money magazine reports that banks have tripled the number of mailed offers for charge cards in recent years, and more lenders are expected to begin offering them.

Sid Kirchheimer writes about consumer and health issues.

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