For any product you purchase or service you patronize, you must pay the price & remuneration, respectively. However, the method of payment can differ depending on the industry and type of business.
Recently, Founder of SpaceX and CEO of Tesla, Elon Musk said in a statement that his company Tesla had gained bitcoin worth $1.5 billion. This bold move caused other companies to buy cryptocurrencies, and this is yet another method of payment.
So, you can see that charge cards and credit cards are the only payment method you can use. However, for the sake of this article, we will strictly focus on making a great comparison between a credit card and a charge card highlighting its differences clearly.
What is a Charge Card?
A charge card is an electronic payment card that doesn’t charge any interest but demands the individual to pay their balance in full upon receipt of the statement, usually on a monthly basis.
A few issuers offer charge cards, so it’s difficult to get. These cards can include an uncapped spending limit with huge reward benefits for the cardholder. But these cards can always include a high annual fee that can range from $150 to $550.
How To Obtain a Charge Card
To get a charge card, you must receive a credit application with good approval. These monies are usually approved for high-quality borrowers with excellent credit. With these cards, you can have unlimited spending however you must pay each month in full which limits their use. If you miss any payment, it can substantially reduce your borrower’s score.
Charge cards are popular because of the rewards and benefits they offer with each purchase. As a cardholder, you can gain purchase points and even statement credits with your purchases, coming along double and triple points on dining and travel expenses.
Hence, they might be a great option for business travel. Card issuers offer cardholders huge exposure to a wide variety of standard items, luxury brands, and travel deals that can be purchased with points accumulated from a charge card.
However, if you’re concerned by potentially high fees but still want to earn rewards, it’s worth keeping in mind that some best rewards credit cards require no annual fees.
Advantages of Charge Cards
When you have a charge card, there are many advantages you can enjoy. Some of these advantages include:
No Set Spending Limit
Charge cards have no preset spending limit. This is helpful in large purchases, so you don’t have to makeover one transaction. A huge purchase on a credit card could bring you so close to your credit limit, which is bad for your credit score.
Having no predetermined spending limit is important, especially when you run a business that demands this. Although this might sound exciting, you must consider you can’t spend beyond the limit you have set in as your largest repay sum.
No Debt or Added Interest
With a traditional charge card, you can’t get into debt because you have to pay off the amount you took off every month. Hence, this means there are no interest charges, and this is very beneficial for workers who want to pay for emergencies.
Huge Rewards
Charge cards can come with generous spending rewards and built-in perks, especially for travel. Although credit cards are building competition to create a limitation, it hasn’t worked so far.
Credit Score Impact
The difference between charge cards and credit cards is usually not felt so bad when you use them responsibly. It can help you build your credit so you access other opportunities easily.
One strong advantage of a charge card is you can spend as much as you want during a given month, and it won’t hurt the utilization element on your credit scores.
Further Reading: How to Increase your Chase Credit Limit in 2022 | Updated
What is a Credit Card?
A credit card is a thin rectangular piece of plastic or metal any bank or financial industry offers to its customers through which they can borrow funds to pay for goods and services with merchants that accept cards for payment.
All credit cards have conditions placed on them as cardholders have to pay back the borrowed money, plus any applicable interest, and any additional agreed-upon charges, either in full by the billing date or over time.
The credit card issuer can grant a separate cash line of credit (LOC) to a cardholder to help them borrow money as cash advances that can be accessed through bank tellers, ATMs, or credit card convenience checks.
Charge Card vs Credit Card – Major Differences
When it comes to a charge card and a credit card, there are only a few key differences between them. These differences include:
| Charge Card | Credit Card |
| No interests | You pay interests |
| No pre-spending limit | Credit limit |
| Pay Your Balance Monthly | Unnecessary to pay the balance monthly |
What are the Similarities Between a Charge Card and a Credit Card?
Although the charge card and credit cards have vast differences, they still share key similarities. These similarities include:
- Both cards allow you to make purchases
- Both cards help you manage cash flow
- No collateral involved
Conclusion
Both credit and charge cards make it easy for you to access money whenever you need it. With any of them, you don’t need to get setbacks on making important purchases you need to make. Your choice of a card would depend on the type of business you run.
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