• There are distinct differences between credit, charge and debit cards.credit card and hand image by Warren Millar from Fotolia.com
  
  People usually prefer plastic forms of currency because they are more convenient than carrying cash or checks. Credit cards, charge cards and debit cards allow users to pay for their purchases without fumbling with coins or wads of paper money. Buying goods and services is as easy as swiping a card, entering a personal identification number or penning a signature. Although debit, credit and charge cards basically look the same, there are several differences in terms of their functions, benefits and disadvantages.
  
  

Monthly Obligations

• For debit, credit and charge card holders, monthly obligations, if any, vary. Using a credit card is similar to borrowing money from a financial institution; the funds are loaned to the customer at a predetermined interest rate, and a portion of the funds must be repaid on a monthly basis. If the customer is unable to repay the entire required portion at the end of the monthly billing cycle, he usually can continue charging goods and services on the card.
  
  Customers who use charge cards are also required to repay the funds used at the end of the monthly billing cycle, but they must pay back the entire amount. If a charge card holder is unable to repay the entire amount, her card is made invalid until the amount is paid in full.
  
  Debit card holders do not have monthly obligations; the debit card is linked to their bank account, and the money is automatically deducted each time the card is used.
  
  

Spending Limits

• Credit cards decide limits based on a person's age, income and credit history. Charge cards generally have higher, often unlimited spending limits because no matter how much is spent, the customer is required to repay all the money at the end of each billing cycle. Debit cards also don't have monthly limits, as the money comes directly from the customer's bank account.
  
  

Fees and Interest Rates

• Most credit cards have an average annual interest rate of 19%, according to Investopedia.com. If a customer is unable to repay his monthly portion, he is charged additional interest on the unpaid amount. Some credit cards also charge their customers an annual fee for usage.
  
  Charge cards typically do not charge an interest rate because the money is repaid in full at the end of each month. Some charge cards require customers to pay an annual fee for the service and also charge high penalty fees if a customer fails to repay the monthly balance.
  
  Debit cards do not charge interest rates because the money spent comes directly from the customer's bank account, but they do charge overdraft fees. If a customer pays for something with her debit card but lacks sufficient funds in her account, the bank may charge her a penalty fee for covering the purchase.