Charge Card Vs Credit Card – What’s The Difference?
Singaporeans are quite familiar with debit and credit cards, but what about charge cards? Have you even heard of them before?
One of the most famous cards in the market (which many mistakenly think it is a credit card), is the Amercian Express Personal Card. Remember that iconic AMEX card that’s green in colour? Yes, that’s a charge card. So what’s a difference between a credit and charge card?
No Pre-set limit
One of the main difference between a charge card and a credit card is that the former does not come with a spending limit. Yes, unlike a credit card that comes with a credit limit based on your annual income, a charge card endows you with a higher purchasing power. For months where you are going to spend more, there’s no need for you to call up your bank to bump up your credit limit for the month, or face any possible rejections.
In Singapore, the MAS limits those with an annual income between $30,000 and $120,000 to a limit of 4 times your monthly salary, whereas those who earn more than $120,000 a year will be eligible for limitless spending.
Before you think you can go on a limitless shopping spree, read the next point first.
No Rollover balance
A credit card is essentially an interest-free loan from your bank for 30 days, after which you can choose to repay your entire bill in full or pay the minimum and rollover the rest of the bill with interest chargeable.
For a charge card, you will need to settle the entire bill at the end of the month. This means that you cannot delay the payment to next month. If the reason why you like credit cards is because they give you the option to spread the cost of your spending over a few months, a charge card definitely won’t be for you. While some may not like this feature, the good thing is that being forced to settle the entire bill at the end of the month also helps you to be more financially disciplined. What’s more, there’s no fear of any interest charges or late payment fees!
Other than these 2 main differences, a charge card allows you to earn reward points that are pretty similar to the reward systems used by major credit cards. For example, the AMEX Personal Card earns you 5 membership points for every $1.60 spent at each of these merchants – Starbucks, Jasons Market Place, Kinokuniya, Amazon and Epicentre. The card also comes with a unique purchase protection scheme which offers repair, replacement or reimbursement to purchased goods that have been damaged or stolen within 90 days.
Credit Card or Charge Card?
If you are looking for deferred payment with a card, a credit card may suit you better since a charge card will require you to pay the entire bill at the end of each month. However, if you want to keep your balance in check each month and prefer to ensure that you do not rollover your bills monthly, a charge card will probably suit you best.