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Charge Cards vs. Credit Cards – Identifying the Differences

Balance transfer and credit score

What are Charge Cards?

Charge cards are in truth credit cards that require you to pay up your monthly balance in full. They offer a line of credit based on credit worthiness and other criteria implemented by the card issuer during the selection process. Charge cards charge no interest rates until a cardholder transgresses the terms of issuance.

What are Credit Cards?

Credit Cards provide a line of credit allowing cardholders spend all or none of it within a monthly period. Outstanding balances can be paid for in small installments with a minimum balance of 2% in some cases.

Charge Cards versus Credit Cards

Balance Transfers

Most charge cards do not have a balance transfer feature and sincerely it doesn’t make sense to include this feature on charge cards. Why transfer credit to a card requiring you to pay off in full when you’ve accumulated credit due to your inability to do so in the first place. This amongst others best known to creditors is the reason you’d rarely find a balance transfer feature on charge cards.

Annual Fees

After reviewing countless charge cards and credit cards, you’ll find that charge cards are more likely to have an annual fee. A credit card expert attributes this to the fact that charge card issuers little money from interest payments so annual fees are logically the biggest income stream on charge cards. Creditors issuing credit cards can afford to offer a $0 annual fee since the average American credit cardholder usually has an outstanding balance at any given time.

Credit Needed

The average charge card is offered to consumers with good or excellent credit. Although it makes sense to issue charge cards to persons with below average credit since they’ll have to pay in full and have control over their spending as a result, creditors are not ready to take that gamble just yet. And consumers in need of credit repair are those that creditors gain more profits from. These consumers are more likely to default on their payments, and stick to the monthly minimum payments.

The average consumer goes for a charge card or credit card based on his ability to offset monthly balances in full. Charge cards have the benefit of being able to control your spending. This is quite useful for persons interested in building a solid history over time and weary of excessive spending. Families who use charge cards have a greater chance to sticking to the budget compared to those using credit cards and cash. Although charge cards and credit cards will not charge any interest for paying in full at the end of a billing cycle or monthly period, both cards will commence penalties once you don’t pay in full. In case of a credit card, the cardholder incurs interest rate on outstanding balances while charge cards may have more severe punishments often including hefty late payment fees and other fees listed in the card agreement.

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