A charge card is one type of credit card. However, a charge card doesn’t have a credit limit, minimum payment requirements or any interest. To qualify for a charge card, a person needs to meet a certain income level and have a high credit score. There are not a lot of issuing credit card companies that offer charge cards. They often require a cardholder to pay an annual fee.
A charge card may have rewards attached to it. An example of a rewards charge card is earning cash back, travel miles or points when making purchases. However, not all charge cards have these perks.
The advantages of a having a charge card is that there is no limit. Since there is no preset limit, the purchases are approved based on payment history, credit score, financial resources, and spending history. However, the cardholder can charge as much or as little as he or she wants. Another advantage is that a person can build his or her credit history without getting into large debt. In addition, having a charge score typically won’t hurt a person’s credit score like having too many credit cards typically does.
Of course, every type of credit card comes with disadvantages. The other side of having no credit limit is that it must be paid back each month. The total amount. Remember, there’s minimum payment associated with a charge card. Therefore, if you charge $500, you must pay that amount the next month. If you don’t pay the amount during the next billing cycle, another problem could arise.
The issuing card company will suspend charging privileges. Also, the issuing company reviews credit purchases. If there is too many charges, the company also suspend charges. If the charge card privileges aren’t suspended, the cardholder could face a penalty. The penalty is on the balance that is not paid by the billing date. It could be as much as five percent.
There are some issuing credit card companies that are relaxing the tough restraints of paying the full balance each month on some types of purchases. For instance, a cardholder may charge travel-related expenses to his or her charge card. The charge card company could allow a preset limit that can be paid back over time. It’s similar to making credit card purchases.
A charge card differs from having a credit card in may ways. However, the card does have some drawbacks including the fact that the cardholder must pay the full balance each month. There is no outstanding balance each month so it protects a person’s credit. Anyone interested in a charge card should decide if the card fits into his or her budget.
