True credit cards have a set spending limit ($500, $2,500, $25,000, etc.) based on the card holder's credit rating and current income. They enable consumers to carry a balance from month to month, and they charge interest on the outstanding debt. When you think about charge cards, think American Express. Unlike credit cards, charge cards do not have a monthly spending limit. You can make a virtually unlimited number of purchases with your card, but you need to pay the balance in full each month. To discourage you from carrying a balance, charge cards generally impose a fee and tack on penalties anytime you don't pay in full. Debit cards work like plastic checks. When you make a purchase with a debit card, the payment for the purchase is taken directly from your bank account.

From a financial perspective, debit and charge cards are structured so that they pose little danger to your financial well-being. Their internal controls discourage or forbid carrying a balance, so the temptation to make purchases that you can't afford is minimized. Credit cards, on the other hand, have served as the instrument of financial ruin for more than a few people.

To figure out which one or ones are right for you, read this article.