Credit Card Articles
What is a Charge Card?
Otherwise known as a charge credit card, these are cards basically credit cards requiring the card member to pay in full the card balance at the end of each month or billing cycle. Charge cards do not have an Annual Percentage Rate (APR) since balance cannot be rolled over from one billing cycle to another. Instead, consumers using a charge card incur an annual fee and monthly fees which are deducted from the available balance.
How do they work?
Charge cards work much differently from credit cards. The consumer has to pay the card balance in full which means there'll be no revolving balances. Similar to credit cards, a charge card restricts the member from spending above the credit limit. Some charge cards come with a pre-set spending limit which can be extended on the request of a card member. Card issuers will often charge a late fee if the member pays the balance after the grace period.
Although the annual fee may be waived for the first year in charge, card issuers often charge a high annual fee. Some charge cards have an annual fee as high as $450. This high annual fee helps compensate the card issuer to an extent due to their inability to earn money from interest charged on revolving balances.
A charge card could come on any of the card networks serving credit cards and are usable for both online and offline transactions. A charge card will be accepted if a credit card is accepted except where the transaction is declined by the card issuer.
Charge card users are often treated to card rewards, and benefits similar to those offered credit card users of a similar niche.
Deciding if you need a Charge Card?
Determining whether you need a charge card compared to a credit card is a tricky decision based on your personal answers to these headings.
- How much can you afford?
The reason a lot of us go for credit cards is cause we're likely to make purchases we may not be able to pay for in cash. Charge cards require you to pay your total expenses made during a monthly period. If you can't afford to do this, a credit card is a much better option since you're only required to pay a minimum of how much you've spent for each month.
For budget conscious individuals who know how to stay within a budget, a charge card is preferred since they won't have to incur interest and accumulate debt as compared to if a credit card were to be used.
- Credit Rating
The charge card market is quite large with cards available to everyone including those with limited credit. Depending on how good or bad your credit rating is; a charge card could help you improve your credit history over a period of time. Card issuers will report card transactions to any or all of the credit bureaus. Frequent and timely card balance payments are most likely to help build better credit scores over time.
Similar to credit cards, card issuers offering charge cards will rewards to serve as incentive to potential charge card users. These rewards range from points or miles per valid purchase transaction, to discounted travel and personal concierge services. In some cases, the card issuer sends the card member a check once a certain number of points are accumulated. Some issuers partner with airlines, and resorts to provide incentives and rewards to charge card users who frequent such partners.
Members are not allowed to transfer balances from a credit card or even another charge charge. This is simply impossible and such transactions are rejected for the issuer or handling company.
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