Credit cards and charge cards are two different financial tools that allow you to make purchases without cash.
Credit cards offer the ability to carry a balance, but typically you pay interest on your credit card bill. Charge cards require full payment when due, and there are no interest charges.
In this article, we will discuss in detail what makes them different.
A credit card is a type of revolving loan extended to the borrower based on his/her credit score and reliability. Cardholders can borrow funds for purchases or transactions, and pay off the balance within the stipulated time. After a certain period, the balance incurs interest.
A charge card is a type of credit card that requires the user to pay off the balance in full at the end of every month. It does not allow the user to carry the balance to the next month.
While credit cards are a popular financial tool in India and many are not aware of the benefits that charge cards offer.
Here are the differences between a charge card and a credit card.
| Charge Card | Credit Card |
|---|---|
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It is necessary to pay off the balance each month on charge cards |
Using a credit card allows cardholders to carry a balance from month to month and pay just the interest |
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Individuals with good to excellent credit history are eligible for charge cards |
Credit cards are extended to users with low credit scores as well |
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Charge cards have no impact on the credit utilization ratio or credit scores as their balance is paid off completely every billing cycle |
Credit cards are influenced by the credit utilization ratio and credit scores increase or decrease depending on their usage |
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Charge cards do not come with a credit limit |
There is a spending limit on credit cards and it varies depending on the cardholder |
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Charge cards are not revolving credit, hence, have no interest rate |
The interest rate is applied to the balance if it is not repaid within a certain time |
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Charge cards have high annual fees |
Some credit cards have no annual fee |
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Charge card prevents the owner from accumulating debt as the amount borrowed |
Credit cards are high-risk and can plunge users into deep debt |
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Charge cards offer exclusive benefits and rewards |
Credit cards offer rewards as well |
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Charge cards are offered by very few banks as the concept is still alien to Indians |
Credit cards are offered by every bank available |
Charge cards have no spending limit, making it easier for you to fulfill your financial dreams. Additionally, these cards make it impossible to carry a balance to the next billing cycle, so they reduce the possibility of going into debt.
Charge cards are exclusively offered to excellent credit score holders and provide unique rewards as well.
Credit cards are revolving credit that allows you to carry a balance and repay it in installments. Not only does it help you fulfill your financial responsibilities, it only does not burden you with repayment.
Charge cards are not available to everyone. They are exclusive and do not allow carrying a balance. Since the cardholder must repay the whole balance at once at the end of each month, it can pose a financial difficulty. Moreover, charge cards have high annual fees.
Credit cards, if not used smartly, can plunge you into more debt as they come with high-interest rates. Any delay in repayment will add additional fees and interest charges increasing your debt and reducing your credit score drastically.
Depending on your financial situation and requirements, choose a card that would benefit you. Moreover, charge cards are rare in our country and only available to an exclusive few, making credit cards the only choice for most.
Charge cards and credit cards are financial facilities that help us achieve our financial obligations. They offer several benefits for the users and additional rewards for spending using the card.
However, the card you choose is a personal choice that depends on your financial situation. It is best to analyze your requirements and make a decision based on that.
There is no interest charged on a charge card because it must be paid in full each month. Rather than charging interest on unpaid charge card balances, late-payment fees are usually based on the past-due amount.
Interest is not required when using a charge card, but there may be significant penalties for paying late. Charge cards frequently provide generous rewards and benefits, including statement credits, double or triple points on dining and travel purchases, and purchase points.
Charge card is ideal for large ticket purchases.
When it comes to revolving credit, credit cards provide more flexibility, but charge cards have no preset limit. You can choose a card depending on your requirements.
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