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 Cards vs. Credit Cards
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!
What’s your take? Do you have a charge card? Would you ever use one?