Charge Card versus Credit Card: What Should You Get?

Regular credit cards work differently than charge card credit. Before you decide which type of card to get, you should understand the differences between how a regular revolving credit card works and how charge card credit is used.

Revolving Credit Cards

Most credit cards work in a similar fashion. Credit cards provide a set limit to the total amount of money that can be borrowed at any time. The credit card holder is allowed to borrow some or all of that limit every month. When the statement arrives, borrowers are required to make at least a minimum payment that is specified on the statement. If the balance is not paid in full, interest fees (called finance charges) are then levied on the next statement, along with the remaining amount due. The balance can remain on the card until the borrower pays the total amount due, interest included, and they can continue to use the card for other purchases in the meantime.

Charge Cards

Charge cards allow the borrower to make a purchase of any amount. While there is no limit to how much the borrower can charge to the card, they will be responsible for the full balance charged for that month when the statement arrives. There are typically annual fees and other fees associated with charge cards that might make it more expensive that carrying a regular credit card. Hefty late charges and penalties can be added to the bill if the full balance is not paid by the statement due date. Interest is only charged if the balance is not paid in full when due. If the borrower fails to pay all of the money that is due, they may no longer be able to make charges to the card at all.

Which One Is Right for You

Revolving credit cards are more commonly used than charge cards. Most credit cards are now available without annual fees, and as long as the minimum payments are made on time, and the borrower's credit score is good, interest fees are kept at a reasonable rate. Revolving credit cards a great for people who are new to credit and are trying to build a history. There is a danger, however, of spending too much, and always having a high balance that they are unable to pay completely.

Charge cards are for individuals who have established good credit and need to make significantly large purchases on a regular basis. Individuals with the self restraint and financial security to be able to fully pay the balance in full every month may opt to use a charge card.The responsibility of having to repay everything charged after a month can keep you from accumulating debt that you are unable to repay.

Since there are a variety of fees that are associated with charge cards, if you are able to pay off the balance every month, it may be cheaper to get a revolving credit card. If your credit card balance is paid off completely each month, you will not have to worry about interest or late fees. Even if you do carry a balance, interest paid over time on a credit card may be less than the annual fee and other fees associated with charge cards.

With either type of card, it is best to examine all of the fees to determine what will be most cost effective for you.


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