- Are a revolving line of personal credit that do not need to be paid in full every month.
- Accrue interest on the outstanding balance each month. The interest may be backdated to the date of initial purchase.
- Have a spending limit, set at a predetermined dollar value.
- Only require you to make a minimum repayment; you never need to pay off the balance in full.
- Use interest-free days, low-interest rates, rewards programs and other features to tailor the product to different types of spending profiles.
- Are a line of credit that must be paid off in full at the end of each billing cycle (typically between one to three months).
- Charge no interest or additional service fees. They generally have an annual fee though and if your card is not paid off in full at the end of billing cycle, a late fee or other penalty may be charged.
- Are typically issued either without spending limits or with very high limits, based on the holder’s normal spending habits.
- Are better suited to high wealth individuals who can pay off larger debts at the end of the billing period.
- Enable more comprehensive expense tracking. Or in other words, more detailed itemisation of spending.
So: Which one to choose?
The question as to whether you should choose a credit card or charge card will depend in part on both your spending habits and the level and reliability of your income. Here are a few questions to ask yourself:
- Do you always pay your card in full each month?
A charge card imposes fiscal restraint, as it must be paid off in full each month. If you are unsure whether this would be achievable, though, a charge card may not be for you.
- Could you deal with a higher credit limit?
Because you are paying off your debt each month, charge cards generally provide either a higher credit limit or waive the credit limit altogether. This can be a great advantage of course “