It's about safety. If information gets longer than necessary in memory, it is more likely that the application will be compromised and someone with access to the machine can pick up the password.
Strings are immutable, you can not write about it, if you want to change the contents of a string , you have to create another new string and discard this old one. The problem is that the actual disposal will only occur when the garbage collector takes effect, and can take a long time.
char is changeable, so at any time you can zero the contents of it. Even if it is not collected at the time, having the values reset the password will not be exposed for longer than necessary (that is, a tiny fraction of a second).