Do you have a charge card? Do you know what it is? Would you ever need one versus a debit card or a credit card? Today I’m going to look into charge cards: a bit of their history, their advantages / disadvantages, as well as some of the best charge cards available today.
History of the Charge Card
Do you ever wonder why we say “charge it” when we’re using our credit card? Shouldn’t we be saying “credit it”? Well, at one time all we had was a charge card. The charge card was introduced in 1950 by a company that would eventually become Diners Club.
Charge Card vs. Credit Card
A charge card is different from a credit card for several reasons.
- The balance is due in full each month.
- There is no minimum payment. The minimum is the entire balance.
- There are no interest charges.
- Late payment results in major fees and possible cancellation.
- It’s not revolving credit, it’s just a short-term loan.
Benefits of the Charge Card
Noting some of the points above, you can see that depending on your circumstances, the charge card can help you stay out of debt.
The charge card can also help you build a credit history. It can also help protect you from defective product purchased.
Lots of business owners typically find value in a charge card. Since they work like a short-term line of credit, they can help small business owners stay flexible during the month if cash flow is poor. At the same time, a charge card would discourage a business owner from racking up a bunch of revolving credit card debt.
Lastly, charge cards have perks. The charge card brings with it great service and access to rewards that you wouldn’t normally get with a debit card or regular credit card. That is, except for the rewards checking account and debit card from PerkStreet, who offers 2% cash back.
The Downside of Charge Cards
Charge cards aren’t without their negatives. They typically come with annual fees. Also, while a charge card helps your credit history it doesn’t help your credit utilization since you don’t have an approved spending limit, like that of a credit card revolving debt.
Charge Card Companies
Traditionally Visa/MasterCard have been the card company to provide debit and credit cards, while American Express has provided both credit cards and charge cards. Diners Club is also in the charge card business. Telly Savalas, baby!
Current Personal Charge Card Products
Here are the most notable personal charge cards that I’m aware of on the market. Do you know of any more?
| Card | Initial Bonus | Annual Fee | Notes |
|---|---|---|---|
| ZYNC from American Express (review) | None | $25 | Earn 2 Points Per Dollar in Select "Go Pack" Categories |
| American Express Preferred Rewards Green Card | None | $95 | Annual Fee Waived 1st Year |
| American Express Preferred Rewards Gold Card | $100 - Spend $500 in 3 Months | $125 | Annual Fee Waived 1st Year |
| American Express Premier Rewards Gold Card | $150 - Spend $30K in Calendar Year | $175 | Annual Fee Waived 1st Year |
| American Express Platinum Card | $250 - After $1,000 Spent in 1st 3 Months | $450 | Gives you free office space anywhere in the world. |
What’s your take? Do you have a charge card? Would you ever use one?
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I did not know there was a distinction between these and credit cards. I don’t have a charge card and probably won’t apply for one.
I’m aware of all of this, but I still don’t see the benefit of a charge card. You have to pay in full. Big whoop. You can do that with a credit card.
Purchase protection and points are not part of the definition of a charge card. Besides, those benefits exist on some credit cards too.
I usually try to use debit so I can see exactly what is being deducted but I may get a new card to try to charge more to get the rewards. I want some miles points.
I personally do not use a charge card but I would not be opposed to it since my main goal with using a credit card is just to use it for the cash back and then pay off the balance in full every month anyway.
Informative post. I don’t have a charge card, but after reading your post, they wouldn’t be such a bad idea. Especially since you’re forced into paying them off each month. Do you know what you can expect in the yearly fee as compared to a credit card that earns points? Just curious about the difference, if there is any.
Yeah, I think the fees are pretty high. Like $95 for the Green Card listed above. I think that’s the cheapest.
The charge card is the way to go. No long term credit card debt.