What You Must Know About Charge Cards

“With great power comes great responsibility” -Voltaire, … and Spiderman

Most people are familiar with credit and debit cards, but what about charge cards?

First here are ways charge cards mirror debit/credit cards:

  • Looks and feels like a credit or debit card
  • Many come with a pin for security and mobile app for quick balance, limit, and payment options
  • Many offer rewards similar to credit cards (travel, points, cash back, etc.) and may require minimum initial/monthly spend to qualify
  • Late fees may apply when the balance is not paid off
  • Can both positively or negatively impact your credit
  • Accepted at many locations where debit and credit cards are taken
  • Minimum credit score required to qualify
  • Both Credit and Charge cards may offer similar protections (trip interruption, damage waiver, etc.) and are usually looked at as unsecured debt (see our article on common terms here)

Here are how charge cards are different from credit cards:

Credit Scores

Qualifying for a charge card usually requires a higher credit score (690+ recommended). Also charge cards do not have as many factors included as with credit cards, which means you may not see a charge card positively affecting your credit score as much.

Late Fees and Interest Charges

Charge cards need to be paid off, in full, at the end of every month. Traditional charge cards don’t carry interest fees, but the late fees can be roughly equivalent to interest fees. Also, failure to pay off a charge card can result in an immediate negative hit to your credit.

Spending Limits

Charge cards usually carry a maximum spend amount per purchase, per day, and total. Accessing the mobile app is usually an easy way to see your remaining limits for these categories.

Debt-To-Income Ratio

Some charge cards do come with an interest rate which basically turns them into a credit card if you carry a balance. Traditional charge cards don’t offer interest rates which means they are not supposed to affect your Debt-To-Income Ratio. Buyer beware though: your current balance can be used as a factor, as well as your limits so these cards still can impact this ratio.

Charge cards are a wonderful way to take advantage of additional benefits but also carry many risks so please be thoughtful before applying for a card and feel free to reach out with any additional questions you have for help making an informed decision!

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