Some people may enjoy the ease and benefits credit cards offer, but really dislike carrying a balance over a period of months or years. There is another option: charge cards. Yes, they are still plastic rather than paper and build your credit score, but charge cards also provide an automatic method for debt prevention. They are also NOT credit cards, although they are often erroneously referred to as such. Let’s discuss why.
Are Charge Cards the Same Thing as Credit Cards?
Both are payment options involving lines of credit extended to a consumer but that is where the similarity ends. Here are the reasons why:
- Charge cards have no set limit for spending. That, however, does not mean the sky is the limit as lines of credit for charge cards are fluid and determined by the consumer’s anticipated spending amount.
- Charge cards have no interest penalties because the balance must be paid in full at the end of each billing cycle.
- If balances are not paid the customer incurs a late fee that is normally the amount of what a bank would charge for a bounced check.
- While many credit cards do not employ annual fees, nearly all charge cards do have an annual fee and they vary widely from fairly inexpensive to downright steep.
- Although credit cards offer some excellent rewards for their use, charge cards provide even more extensive benefits such as primo tickets for shows, attractions and concerts as well as points that can be exchanged for actual cash back.
Charge Cards and Credit Reporting
When it comes to your credit score and charge cards it becomes a bit murky. Many credit agencies typically establish a person’s credit limit by reviewing the largest limits the card has throughout the entire history of use. If this amount decreases over time it can actually diminish your credit score. Other credit agencies classify this type of card as a component of demonstrated payment capability. The catch is they do not apply it to overall use capacity because there is no credit limit.
Where Can You Get Them?
American Express has the market cornered on charge cards because not very many other companies offer this service. They also are not very easy to obtain as American Express keeps mum on their standards for issuing them. Let’s just say you have to have possess an excellent credit score and healthy income to receive the green light to own charge cards.