Legal Definitions - charge account

A charge account is a type of credit arrangement that allows a customer to purchase goods or services immediately and pay for them at a later date, either in installments or as a single payment by a specified deadline.

Here are some examples to illustrate how a charge account works:

• Department Store Credit: Imagine a customer who frequently shops at a large department store. They apply for and receive a store-branded credit card. Throughout the month, they use this card to buy clothing, home goods, and electronics. At the end of the billing cycle, the store sends them a statement detailing all their purchases and the total amount due, which the customer then pays by the due date.

  This illustrates a charge account because the customer purchased various goods on credit directly from the store, accumulating charges over time, with an agreement to settle the total amount periodically (monthly).

• Utility Services: Consider a homeowner who receives electricity, water, and gas services from their local utility providers. They consume these services daily without immediate payment. At the end of each month, the utility companies send a bill for the services used during that period, which the homeowner is expected to pay by a specific due date.

  This is an example of a charge account because the homeowner consumed essential services on credit, and the utility company allows them to pay for these accumulated services periodically (monthly) within a set timeframe.

• Business Supplier Credit: A small catering company regularly orders fresh produce and ingredients from a wholesale food supplier. Instead of paying for each order individually, the supplier has set up a charge account for the catering company. This allows the catering company to place multiple orders throughout the month, and the supplier sends a consolidated invoice at the end of the month, which the catering company pays within 30 days.

  This demonstrates a charge account in a business-to-business context, where one company purchases goods from another on credit, accumulating charges over a period, with an agreement to pay the total amount periodically (monthly) by a specific deadline.