Are Charge Cards Better Than Credit Cards?

The first credit cards were actually charge cards which required you to pay your balance in full at the end of each month. Credit cards that allowed you to carry or “revolve” your balance were introduced decades later. If you’re on the market for a new credit card, you may consider whether you should apply for a credit card or a charge card.

Can you pay in full each month?

The biggest difference between charge cards and credit cards – and often the deciding factor – is whether you can afford to pay for your charges in full each month. Charge cards generally don’t let you carry a balance beyond the due date. If you miss your payment, you face hefty interest fees or a late charge.

Though, conventional wisdom says that paying your credit card balance in full is best anyway, not everyone follows this advice. If you don’t pay the credit card balances you have now, would you really pay your charge card balances?

Do you have excellent credit?

A great credit score – think 720+ – is a requirement to get a charge card. Because charge cards require full payment each month, issuers only give them to borrowers who’ve proven they can handle their credit responsibilities. If you don’t have excellent credit, you need not apply. A regular credit card is a better option.

No Present Spending Limit

Charge cards don’t have a credit limit that’s present on the credit card before it’s given to you. Instead, your spending limit is based on your income and payment history with the charge card. Your card issuer will approve or reject each purchase based on your spending habits. If you’re planning to make an unusually high purchase, it’s wise to call your credit card issuer to make sure the charge will go through.

Rewards

Some charge cards have great rewards programs that offer cashback, points for merchadise, or travel rewards. Many of these reward programs are better than the rewards programs offered by standard credit cards. The rewards make a charge card an attractive option, if you qualify.

Fringe Benefits

Charge cards also come with several other benefits that regular credit cards do not have. For example, charge cards may have warranty protection on items you purchase with your card. You can use this warranty when the regular warranty runs out. Ninety-day returns are another great benefit of some charge cards. Regular credit cards offer the standard 60-day protection for fault merchandise. You’ll get an extra 30 days to try out your product when you have a charge card.

Annual Fee

All the rewards and benefits that come with a charge card aren’t free. Charge cards come with an annual fee that can be as high as $300 per year. Many charge cards will waive the fee in the first year. Some waive the fee if you make a certain amount of purchases on the card within the year.

Charge Card or Credit Card

Charge cards aren’t for everyone. You need to have the necessary credit rating and discipline to qualify for the card and pay your balance every month. And, if you’re not keen on paying an annual fee each year, charge cards aren’t for you.