What is a Charge Card?
A charge card provides an alternative payment for cash when making purchases. The issuer and cardholder enter into an agreement regarding debt incurred on the charge account. This will be paid in full and by a due date (usually every month) or be subject to severe late fees and restrictions on card use. Charge cards are typically issued without spending limits although one may be penalized for a late payment. On the other hand, credit cards always have a specified line of credit that should not exceed for purchases.
This article explains the following:
- Difference between Charge and Credit Cards
- Rules on cash Advances and Credit Limits
- Offers from Charge Cards
What is the Difference between Charge and Credit Cards?
The charge card is completely different from the credit card.
The charge card is issued by companies such as American Express. These cards require owners to pay off the total balance every month. There are no interest rate charges and set spending limits. This card may be ideal due to changes in the system and strict policies of major credit card providers. However, charge cards may not be the best option for all consumers. Qualifying for a charge card is similar to the approval criteria for other major credit cards. Consumers must have excellent credit backgrounds.
American Express does not publicly list the other criteria for getting approved for a charge card. There are annual fees for the charge card that are incurred. These fees range from $25 to $450 a year and encompass membership benefits like rewards programs and other incentives based on spending. Late fees are also assessed on outstanding balances if payments are paid late. These fees range from $35 flat-fees to a 2.99% of the total balance due – whichever amount is larger.
Customers are given 40-50 days from the end of the billing cycle to pay the balance, compared to the 20-30 days you have with a credit card. There are also flexible payment options available that allow you to carry a charge card balance for travel purchases made over $200. With the payment plan, you are required to make minimum payments on a monthly basis and interest charges are incurred on the account.
What are Rules on Cash Advances and Credit Limits?
Unlike most major credit cards, charge cards do not allow an option for taking cash advances. American Express will monitor a consumer’s credit report and purchases to assess spending limits. You will not have access to the spending limit you have but if you plans to make a big-ticket purchase; it is possible to ask the company directly. There are no over-the-limit fees but if you go over the cap on spending limits, your card can be declined. Automated alerts can be set up to provide notifications of balance levels. For any additional cards attached to the account, consumers can set spending limits.
Charge cards do work like major credit cards to establish and boost credit history. However, part of your credit score encompasses the outstanding balances you maintain against the available credit limits. The charge card can provide a distorted view of how you use credit and can potentially lower your score depending on how charge account balances are factored in if your charge card balances are too high. Some people would rather use a debit card than a credit card. They may prefer charge cards as the account is factored into your credit score and you have to pay off your balance monthly.
What do Charge Cards Offer?
There a variety of charge cards available in Canada with different incentives and benefits. The most common kind of card benefit is cash back and rewards. That is why these programs are frequently combined with attractive cards rates. Consumers also like being rewarded with airline miles and travel rewards. You can take advantage of travel rewards by using your charge card for things you want to purchase. Finally, the numbers alone can play a vital role in establishing your credit line. If you are looking for competitive transfer fees or a low fixed rate, that keeps your credit limits down. Some companies offer a 0% introductory rate that could reduce your credit liability in just a few months.
Abundance of Charge Cards
The charge cards that are usually offered to consumers are meant to make it easier for consumers to avoid getting into unnecessary debt. It is up to the customers to decide on whether to use credit or charge cards.