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    Credit Cards Vs Charge Cards: Find how Credit Card is different from Charge Card

    Credit cards and charge cards are types of cards offered by banks across the world. Although there are a few similarities between the two and are often used interchangeably by some, they have some major differences. These differences are related to payment terms and spending limits that consumers must understand before choosing one over the other.

    Even if you qualify for a charge card in Singapore, it might be not as good as a credit card for various reasons. Such cards are often used by people with higher credit scores and income, and they provide a wide range of benefits. For example, AMEX charge cards offer cardholders baggage insurance, roadside assistance car rental loss, damage insurance and more. Certain AMEX cards also offer long warranties on eligible purchases.

    With cards, you can make purchases of a much higher amount that can be paid back later. However, unlike credit cards, you would not get any leeway with charge cards when it comes to paying back the amount owed. You will have to mandatorily pay back the whole amount borrowed every month on the due date. If there is any delay in payment, you will be charged heavily and may also potentially lose your card.

    Another important feature of charge cards is that they have no fixed spending limit. So, there is no hard limit in place on the amount of money you can spend on credit, or borrow from the card issuing company. For this reason, most of these cards have a steep annual fee of more than S$500.

    Here, we will describe the major characteristics of both cards, the differences between the two and which type is more appropriate for you.

    Charge cards have no limit

    In Singapore, banks normally set a limit to credit cards which is two to three times your monthly income. For supplementary cards, you have the option of fixing the credit limit on the card. For instance, individuals give supplementary cards to their kids and instruct the bank to place a cap on the credit limit, so they can regulate their expenditures.

    On the other hand, there is no limit with charge cards. Once you have acquired this type of card you could even swipe it to purchase an entire house. However, limits are not actually unlimited. Past a certain point, the issuer will stop providing additional credit.

    If you have the habit of spending recklessly, a charge card can be devastating as it is easy to generate a huge bill. If you are self-disciplined, you do not have to worry about credit limits.

    Charge Cards Have More Exclusive Perks

    A charge card is the preferred option in comparison to credit cards when it comes to the perks offered. For instance, American Express provide these cards with privileges that include a 24-hour global concierge service through which you can book a restaurant in Paris or get an air ambulance in minutes. Perks like these are one of the reasons for the steep annual fee.

    Although corresponding credit cards are coming close in terms of providing perks, there is still a gap between the two.

    There is no variable repayment for charge cards

    With credit cards, you have the option of making variable repayments, in case you fail to pay your total credit card bill. This variable repayment amount differs from card to card. The minimum due amount is close to S$50 or 3% of the pending amount, whichever is higher. There is an interest charged on the remaining amount.

    Charge cards, on the other hand, require you to pay the entire outstanding balance in full. There is no concept of interest associated with such cards. However, if you fail to pay the amount owed, you may have to face some harsh penalties. For example, any further transactions with the card may be blocked. Late payment fees are also higher than credit cards. For some individuals, the high penalty may act as a way to be more disciplined and repay the full amount.

    It is a lot easier to get credit cards

    Most charge cards can be acquired only through an invitation, while anyone can apply for a credit card. So, you cannot get hold of a card unless and until a card issuer sends a letter inviting you to apply for it.

    Banks offer these cards only to people who maintain high credit scores over several years since there is no pre-set limit on spending. The bank has to be certain that you are responsible. You will probably never get this card if you have a history of late payments. Also, to qualify for such a card, your annual income should preferably be over S$180,000. You will have to improve your credit score and take it up to grade A before you stand a chance of getting one.

    You will be able to get a credit card even if you have a less than perfect credit score and most credit cards will be available to you if you just have an annual income of S$30,000.

    Charge cards have a high annual fee

    Charge cards are costly, especially since many of them are invitation-only cards. On the contrary, many credit cards come with fee waivers for the first few years or even a lifetime fee waiver.

    Always match your spending to the card. If you tend to overspend, it is better to stay away from a charge card even if you manage to get one. The combination of severe penalties for not repaying in full on time and no spending limits can lead to serious consequences. Credit cards, even with high interest rates are more forgiving.

    For the right customer, a charge card might be a great way of generating credit. Also, since this type of card compels you to pay off the entire balance every month, they will teach you how to be financially more responsible. However, if you cannot pay your monthly balance in full, you may be better off with a credit card instead. They will be hard to maintain and can potentially destroy your credit history.

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