Is a Charge Card Better than Credit?

Charge vs credit card?The question of which card is better is a matter of preference. Both cards have their unique advantages and demerits. This article will point out the pros and cons of each card so that you can make an informed decision.

What Are Charge Cards?

Charge cards are credit cards that allow you to use just like a debit card. You can pay online, at the stores, or anywhere else that accepts credit cards by using the card. You can also use the charge card to make purchases using your existing credit line. The professionals at SoFi say “a charge card holder’s obligation to pay the bill in full each month is probably the most important distinction. Because you don’t have the option of carrying forward a balance, you won’t pay any interest.”

Advantages of Charge Cards

The main benefits of a charge card are:

• Easy to use
• Charges no interest on the money borrowed
• Allows you to make purchases using your existing credit line
• The charge card is an excellent way to build up a credit history
• Have a higher credit limit that credit cards
• Debts do not affect your credit score

Disadvantages of Charge Cards

The main disadvantages of a charge card are:

• Not as flexible as a credit card when it comes to making purchases
• Charges interest on the money borrowed if the balance is not paid promptly
• Has an annual standing fee that is not included in the interest
• At the end of the month, you have to pay the entire amount borrowed to avoid the balance being charged an interest

What Are Credit Cards?

Credit cards are credit lines that allow you to use the card like an ATM card or a debit card. You can use a credit card just like cash and make purchases. You pay interest on the money borrowed monthly, just like a typical bank loan.

Advantages of Credit Cards

The main advantages of a credit card are:

• Can be used just like cash at any store that accepts credit/debit cards
• Allows you to make purchases using your existing credit line (you pay interest on the money borrowed)
• If you make payments on time, you’ll get a better credit rating than if you only use a charge card to make purchases
• As a rule of thumb, you do not have to settle the debt accrued in full. You need to pay the minimum payment to continue using a credit card

Disadvantages of Credit Cards

The main disadvantages of a credit card are:

• Can be more expensive than a debit card or cash
• You must pay interest on the amount borrowed, just a bank loan
• If you make late payments, you’ll have to pay more interest and fees
• You will probably have to pay penalties and fines if you don’t settle the debt in time
• The credit line is usually not as extensive as a charge card

Additionally, to get approved for a credit card, you need to show that you can pay off the balance in full at the end of each month. You must also show that you can afford to repay the amount owed on time (you should be able to pay your monthly bills). If not, your application is rejected.