Credit Card or Charge Card: Which One Should You Get?

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We all know the benefits and disadvantages of credit cards but when searching for the right card we may ask ourselves if credit cards the right way to go? Are there alternatives?

The answer is yes. Charge cards are another form of plastic money that have a range of benefits, and of course, its own set of terms and conditions.

Read on to see how credit cards and charge cards compare to each other and which one would be better suited for you.

How much of a spender are you? Do you need credit limits to – uhh, limit – you?

Credit cards usually come with credit limits set according to the monthly income of the applicant. The credit limit is usually two or four times your monthly income. Some cards even allow you to decrease this limit. If you have to give a supplementary card to your family member, you can request the bank to cap the limit at half of the original limit offered.

Charge cards on the other hand, theoretically have no set credit limit. You could even buy a car on a charge card but that wouldn’t be a wise decision. Charge cards do however prevent you from buying a house by blocking further credit on the card beyond a point. Now credit limits can work in your favour.

Having a higher credit limit allows you to make big-ticket purchases but this works in your favour only when you’re responsible with your finances. If you’re an impulsive shopper or a spendthrift, having a credit limit can save you from a lot of hassle further down the line.

Are you able to pay your bills in full, all the time?

Credit cards do have the added benefit of variable payment. If you can’t make the full payment of your outstanding balance, you can still get away by making the minimum monthly payments. Although this prolongs the time taken to clear the dues and results in paying more interest, it still gives you the flexibility of paying off a small amount when cash flow is tight. The minimum payment amount may vary from card to card but not by much, and is the ballpark figure of S$50 or 3% of the total outstanding dues.

Charge cards charge no interest but do require you to pay the amount owed in full. This is a headache when the outstanding dues are quite high and you don’t have sufficient money that month. Harsh penalties are doled out when you fail to make the payments. These can include interest being charged on the outstanding amount and result in the card being blocked from making any further transactions.

Do the prospect of annual fee waivers make your heart beat faster?

While looking for a credit card, we often consider the annual fees of the card. While some of the more exclusive ones might cost a fortune, most credit cards charge an annual fee is the range of S$180 to S$200. This is not that high a fee given that most credit cards also offer an annual fee waiver for the first year and some cards for the first two years of owning the card.

Charge cards, on the other hand, are very expensive when compared to credit cards. Charge cards such as the American Express Platinum charge card can cost as much as S$610 every year. When you consider the fees, credit cards definitely are more affordable. Certain credit cards even permanently waive their fee.

Exclusivity vs Easy to Get

Charge cards are quite hard to get your hands on. It’s not as simple as visiting the bank website and applying for a charge card. They tend to be offered only on an invitational basis. If your credit score is chalk full of late payments or defaults, you can kiss your chances of being offered a charge card goodbye. Issuers should be able to trust your capacity to pay the dues and they can do so only after taking a good look at your credit report. Another important requirement is the income.

Charge cards are usually offered to affluent customers. If your income exceeds S$15,000 in a month and if your credit score is in excellent shape, then you have a good chance of being offered a charge card.

On the other hand credit cards seem to be flooding the market. Credit cards have certain income and age requirements, which if met can be given out to an interested candidate. As long as you have the required income, the supporting documents and meet the age requirements, you can get yourself a credit card.

Income criteria for credit cards are set much lower and are usually S$30,000 for Singaporean nationals or permanent residents and S$40,000 or more for foreign nationals.

Do you need perks that make you feel REALLY important?

So far, charge cards and credit cards are somewhat evenly placed. But if there’s one clear area where a charge card excels is the perks offered.

Taking the case of the American Express American Express Platinum charge card, the card takes what most top-tier credit cards offer and exponentially increases them. It offers you a 24-hour global concierge service that performs at the highest level. Be it making a dinner reservation at a fancy restaurant with a view overlooking the Eiffel Tower or arranging for an air ambulance to escort you to a hospital and administer medical treatments. The service can do it all.

Charge cards provide luxury at every turn and while credit cards give the common man something, they can’t hold a candle to what charge cards can offer. You wouldn’t say no to a free luggage or bonus miles when you get a credit card but let’s be honest, a measly 10% discount at Starbucks or a 5% cashback on expenses doesn’t quite compare to what the American Express Platinum charge card can give.

That being said, credit cards can’t entirely be written off. There are quite a few very exclusive credit cards that offer luxury perks but these are not something you can easily get.

Both have pros and cons, which one will you get?

Settling on which one to opt for basically boils down to whether or not you qualify for it and whether your spending matches the card or not.

If you can qualify for a charge card and are responsible enough to make the payments, then great. But if you’re an impulsive spender, the harsh penalties plus the headache of paying the amount in full is just not worth it.

A credit card is easier to acquire, easier to handle, and the credit limits on the card ensure you can’t go bankrupt in one month.

Have you used a charge card before? Do share with us your experience in the comments.

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