Charge cards and credit card are types of credits offered by financial institutions. Many people use the names interchangeably; however, these two cards are different. This article will explain the differences between charge cards and credit cards.
1. Repayment of the Debt Accrued
Charge cards and credit cards have different repayment methods. When you use your charge card, you are obligated to pay the entire amount of money charged to your account. On the other hand, a credit card has a minimum amount that you must pay.
2. Interest Rates
Charge cards and credit cards have different interest rates. Charge cards have a high-interest rate of 21%, while credit cards have an interest rate of around 18%.
3. Fees and Other Charges
Charge cards and credit cards have a lot of similar charges. However, there are some differences in the fees that the two types of cards charge. For example, charge cards charge a fee for paying your bill over time, while credit cards don’t charge you this fee. Also, both cards charge fees for returning merchandise or getting cash back in exchange for unused money on your account.
4. Acceptance to Vendors
When considering charge account vs credit card in terms of acceptance by vendors, credit cards are more likely to be accepted than charge cards. This is mainly because credit card companies offer many benefits to their customers, such as rewards and discounts on the products they purchase.
5. Annual Fees
Charge cards have higher annual fees than credit cards. For example, the annual fee for a charge card is about $50, which is more than the yearly fee of a credit card.
6. Balance Transfers
Charge and credit cards allow you to transfer your balance from one account to another. However, it is important to note that while charging your balance on a credit card will result in extra interest charges, transferring your balance to a charge card won’t result in additional interest charges.
This can be beneficial because it allows you to transfer your balance and pay off your debt without extra fees. On the other hand, if you want to pay off your debt without paying any fees or interest on the amount of money you transfer between accounts, then charge cards are better for you because they allow you to do this at no cost.
7. Credit Scores
The experts at SoFi state, “To maintain or boost your credit score, the general rule is that you should try not to exceed a 30% credit card utilization rate. If you are using up a large number of chunk of the pre-set limit on your credit card, it could have a negative effect on your score.
Because charge cards don’t have a pre-set credit limit, it can be difficult to determine if a cardholder is at risk of overspending — so neither FICO nor VantageScore include charge card information when calculating a person’s utilization rate.”
Charge cards are typically only good for a certain amount of time (generally around one year), at which point they are automatically re-issued at their original rate. As such, it’s important to make sure you use your charge card regularly; otherwise, you may find that it gets re-issued at its original rate or even higher.
