Reconsidering the Charge Card
At the beginning of the credit era, consumers used charge cards. Charge cards allowed people to make purchases with convenience, but charge cards had to be paid off in full at the end of the billing period. This relic of a bygone era may actually be helpful for consumers who are taking a second look at debt incurred by credit cards and looking for a new way of doing things.
Advantages of the charge card
With consumers turning increasingly to frugality in their daily lives, taking “staycations” instead of going long distance, eating out less and concentrating on building up savings and decimated retirement accounts, a charge card could be the ideal solution. Here are some of the advantages associated with using a charge card:
- No credit limit
- Fewer fees (avoid overdraft fees that can come with debit cards and over the limit fees that come with credit cards)
- Less chance of carrying debt, since the balance must be paid regularly
- The convenience of using plastic to pay
- No need to worry about reloading the card (and the fees that come with it)
Drawbacks to the charge card
Of course, there are some drawbacks to using a charge card. The low fees and favorable terms do come with an annual fee. However, this is often low enough that you can easily afford it–not to mention the fact that it is often lower than paying the fees (interest, etc.) that come with credit cards. Another downside is that American Express, which is the main charge card network, is not as widely accepted as credit card networks run by Visa and MasterCard. And, having to pay off the balance each month means that buying things you can’t afford right now is not really an option. But perhaps that is an advantage; you are forced to wait and make sure you can pay for what you purchase.
In the end, you have to assess your financial situation and needs. But you might be surprised to realize that a charge card might be the right fit.
