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What’s The Difference? – Forbes Advisor

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Editorial Note: Forbes may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations.

They may look identical, but charge cards and credit cards are surprisingly different financial tools. Although both allow you to make a purchase without using cash, there’s a big difference when the bill comes. With a credit card, you can carry—or revolve—a balance and pay it off over time, although typically you’ll incur interest charges to do so. With a charge card, any balance must be paid in full when the monthly statement arrives.

There are also other distinctions to be aware of. Here’s a deeper dive into how each type of card works; it will help you decide which one is a better fit for your particular needs.

Read More: The Forbes Guide to Credit Cards

How Does a Charge Card Work?

Unlike a credit card, a charge card doesn’t come with a preset spending limit. This can make it more flexible, since it will grant access to the buying power you need even if that amount fluctuates widely month to month.

This doesn’t mean you have unlimited spending ability, though. If you’re planning on making a significant purchase, first contact the issuer to see if they’ll approve the amount you’d like to charge. Ultimately, a charge card can help you be a more responsible shopper, since you’ll know you’re on the hook to pay back your debt in the not-so-distant future.

A credit card allows you much more leeway. It may have a firm borrowing limit, but you’re only required to make a minimum monthly payment on the total amount you owe. While the idea of smaller payments may be appealing, interest will accrue over time, adding to your overall burden, so it’s still in your best interest to pay your card off in full each month.

But for someone who needs extra time to pay down their bill, a credit card could be the better choice. It’s possible to avoid interest charges for a period of time by using a card with an introductory 0% APR offer on purchases. These offers generally last from six months to nearly two years. It’s almost impossible to find this sort of leniency with a charge card.

How Can I Get a Charge Card?

Although credit cards are available even to those with not-so-great credit, a charge card typically requires a good-to-excellent score. That’s because the issuer is taking a bigger risk by assuming you’ll pay your full bill every month and not giving you a preset spending limit. If you have poor or limited credit history, you may want to look to a secured card instead.

American Express is the only major issuer that still offers charge cards. The options currently available to consumers include:

Even though these are charge cards, they have a feature called “Pay Over Time” that allows certain purchases to be treated as they would be on a credit card, meaning they don’t have to be fully paid off at the end of the billing cycle and are subject to interest charges.

Aside from American Express, a few retailers (notably gasoline chains) may offer charge cards that can only be used within their brand, although the majority of these allow you to carry a balance.

What Are the Key Differences Between a Charge Card and a Credit Card?

There are six key differences between charge cards and credit cards that you should be aware of.

Payments

A credit card requires a minimum payment at the end of each billing cycle, and you can revolve your balance from month to month. A charge card requires payment in full at the end of each month.

Credit Score Required

A credit card can be obtained even with a bad credit score. A charge card requires good-to-excellent credit.

Fees

There are plenty of no annual fee credit cards, but charge cards that are currently available carry a yearly cost of ownership (usually substantial; the fees on the American Express charge cards range from $150 to $550, for example).

Credit Utilization

A credit card has a firm spending limit, and the amount of that limit you use (known as credit utilization) is responsible for about 30% of your FICO credit score. Approaching the limit on your card will likely have an adverse impact on your score.

Since a charge card doesn’t have a limit, your usage of it won’t change your credit utilization.

Rewards

Some credit cards have rewards programs, some don’t. In contrast, all charge cards earn rewards, often at generous rates. The Amex Gold ($250 annual fee – see rates and fees), for example, earns 4 Membership Rewards points per dollar spent at restaurants and U.S. supermarkets*, 3 points per dollar spent on flights booked directly with airlines and provides a welcome bonus of 35,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 3 months. This is on par with a top-tier credit card.

Options

While there are hundreds of credit cards to choose from (each with its own benefits and drawbacks), the pickings are slim with charge cards. The only widely available charge cards are the three offered by American Express.

Should I Get a Credit Card or a Charge Card?

Choosing a credit card or charge card comes down to your own goals and unique financial circumstances. While charge cards have the advantage of preventing you from overspending and amassing debt, there aren’t many to choose from, and they have high annual fees.

In contrast, there’s a wider array of options when it comes to credit cards (including credit cards for those with bad credit), but it’s much easier to rack up debt by revolving a balance. Even so, a credit card, especially one with a 0% APR offer, can be an excellent option for anyone who needs extra time to pay off a big purchase.

In the end, we can’t provide a hard-and-fast rule for which type of card you should get. By understanding what you’re choosing between, you can take a harder look at your financial situation and the cards currently available to make a better decision for yourself.

To view rates and fees of the American Express® Green Card, please visit this page.

To view rates and fees of the American Express® Gold Card, please visit this page.

To view rates and fees of The Platinum Card® from American Express, please visit this page.

 

Forbes adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.

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Bad Credit

If You Want Consumers to Lose, Network Regulation is a Must – Digital Transactions

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After the current U.S. Congress was sworn in, a predictable chorus of merchants, lobbyists, and lawmakers demanded new interchange price caps and other government mandates to decrease credit card interchange fees for merchants. The tired attacks on credit cards are an easy narrative that focuses almost exclusively on the cost side of the ledger, while completely ignoring the cards’ important role in the economy and the regressive effects of interchange regulation. 

To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents. For decades, they have promised these interventions would eventually benefit consumers. But the lessons from the Durbin Amendment in the United States and price cap regulation in Australia is clear. Although some policymakers bemoan the current economic model, arbitrarily “cutting” rates for the sake of cuts completely ignores the economic reality that as billions of dollars move to merchants, billions are lost by consumers. 

For the uninitiated, let’s break down what credit interchange funds: 1) the cost of fraud; 2) more than $40 billion in consumers rewards; 3) the cost of nonpayment by consumers, which is typically 4% of revolving credit; 4) more than $300 billion in credit floats to U.S. consumers; and 5) drastically higher “ticket lift” for merchants. 

Johnson: “To lawmakers blindly acting on behalf of retailers, regulation is a brilliant idea—regardless of how it affects their constituents.”

These are just some of the benefits. If costs were all that mattered, American Express wouldn’t exist. Until recently, it was by far the most expensive U.S. network. Yet, merchants still took AmEx because they knew the average AmEx “swipe” was around $140, far more than Visa and Mastercard. 

Put simply, for a few basis points, interchange functions as a small insurance policy to safeguard retailers from the threat of fraud and nonpayment by consumers. Consider the amount of ink spilled on interchange when no one mentions that the chargeoff rate for issuing banks on bad credit card debt exceeds credit interchange.

Looking abroad, interchange opponents cite Australia, which halved interchange fees nearly 20 years ago, as a glowing example of how to regulate credit cards. In truth, Australia’s regulations have harmed consumers, reduced their options, and forced Australians to pay more for less appealing credit card products. 

First, the cost of a basic credit card is $60 USD in many Australian banks. How many millions of Americans would lose access to credit if the annual cost went from $0 to $60? Can you imagine the consumer outrage? 

In a two-sided market like credit cards, any regulated shift to one side acts a massive tax on the other. For Australians, the new tax fell on cardholders. There, annual fees for standard cards rose by nearly 25%, according to an analysis by global consulting firm CRA International. Fees for rewards cards skyrocketed by as much as 77%.

Many no-fee credit cards were no longer financially viable. As a result, they were pulled from the market, leaving lower income Australians, as well as young people working to establish credit, with few viable options in the credit card market.

Even the benefits that lead many people to sign up for credit cards in the first place have been substantially diluted in Australia because of the reduction of interchange fees. In fact, the value of rewards points fell by approximately 23% after the country cut interchange fees.

Efforts to add interchange price caps would have a similar effect here in the U.S. A 50% cut would amount to a $40 billion to $50 billion wealth transfer from consumers and issuers to merchants. For the 20 million or so financially marginalized Americans, what will their access to credit be when issuers find a $50 billion hole in their balance sheets? 

The average American generates $167 per year in rewards, according to the Consumer Financial Protection Bureau. Perks like airline miles, hotel points, and cashback rewards would be decimated and would likely be just the province of the rich after regulation. Many middle-class consumers could say goodbye to family vacations booked at almost no cost thanks to credit card rewards.

As the travel industry and retailers fight to bounce back from the impact of the pandemic, slashing consumer rewards and reducing the attractiveness of already-fragile businesses is the last thing lawmakers and regulators in Washington should undertake.

Proposals to follow Australia’s misguided lead in capping interchange may allow retailers to snatch a few extra basis points, but the consequences would be disastrous for consumers. Cards would simply be less valuable and more expensive for Americans, and millions of consumers would lose access to credit. University of Pennsylvania Professor Natasha Sarin estimates debit price caps alone cost consumers $3 billion. How much more would consumers have to pay under Durbin 2.0?

Members of Congress and other leaders should learn from Australia and Durbin 1.0 to avoid making the same mistake twice.

—Drew Johnson is a senior fellow at the National Center for Public Policy Research, Washington, D.C.

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Bad Credit

Increase Your Credit Score With Michael Carrington

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More than ever before, your debt and credit records can negatively impact you or your family’s life if left unmanaged. Sadly, many Americans feel entirely helpless about their credit score’s present state and the steps they need to take to fix a less-than-perfect score. This is where Michael Carrington, founder of Tier 1 Credit Specialist, comes in. Michael is determined to offer thousands of Americans an educated, informed approach towards credit restoration.

Michael understands the plight that having a bad credit score can bring into your life. His first financial industry job was working as a home mortgage loan analyst for one of the nation’s largest lenders. Early on, he had to work a grueling schedule which included several jobs seven days a week while putting in almost 12-hour days to make $5,000 monthly to get by barely.

“I was tired of living a mediocre life and was determined to increase the value that I can offer others through my knowledge of the finance industry – I started reading all of the necessary books, networking with industry professionals, and investing in mentorship,” shares Michael Carrington. “I got my break when I was able to grow a seven-figure credit repair and funding organization that is flexible enough to address the financial needs of thousands of Americans.”

With his vast experience in the business world, establishing himself as a well-respected business leader, Michael Carrington felt he had the power to help millions of Americas in restoring their credit. Michael learned the FICO system, stayed up to date on the Fair Credit Reporting Act (FCRA), found ways to improve his credit score, and started showing others.

The Tier 1 Credit Specialist uses a tested and proven approach to educate their clients on everything credit scores. Michael is leveraging his experience as a home mortgage professional, marketing executive, and global business coach to inform his clients. He and his team take their time to carefully go through their client’s credit records as they try to find the root of their problem and find suitable financial solutions.

The company is changing lives all over America as it helps families and individuals to repair their credit scores, gain access to lower interest rates on loans and get better jobs. What Tier 1 Credit Specialists is offering many Americans is a chance at financial freedom.

Michael Carrington has repaired over $8 million in debt write-ups and has helped fund American’s with over $4 million through thousands of fixed reports. “I credit our success to being people-focused,” he often says. “The amount of success that we create is going to be in direct proportion to the amount of value that we provide people – not just our customers – people.”

Because of its ‘people-focused goals, the Tier 1 Credit Specialist is determined to help millions of Americans achieve financial literacy. It is currently receiving raving reviews from clients who are completely happy with the credit repair solutions that the company has provided them.

Today, Michael Carrington is continuing with a new initiative to serve more Americans who suffer from bad credit due to little or no access to affordable resources for repair.

The Tier 1 Credit Socialist brand is changing the outlook of many families across America. To do this, the company has created an affiliate system that will provide more people with ways of earning during these tough economic times.

As a well-respected international business leader and entrepreneur with numerous achievements to his name Michael Carrington aims to help millions of Americans achieve the financial freedom, he is experiencing today. Tier 1 Credit Socialist is one of the most effective credit repair brands on the market right now, and they have no plans for slowing down in 2021!

Learn more about Michael Carrington by visiting his Instagram account or checking out the Tier 1 Credit Specialist website.

Published April 17th, 2021



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Bad Credit

Does Having a Bank Account With an Issuer Make Credit Card Approval Easier?

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Better the risk you know than the one you don’t.

When it comes to personal finance, nothing is guaranteed. That goes double for credit. That’s why, no matter how perfect your credit or how many times you’ve applied for a new credit card, there’s always that moment of doubt while you wait for a decision.

Issuing banks look at a wide range of factors when making a decision — and your credit score is only one of them. They look at your entire credit history, and consider things like your income and even your history with the bank itself.

For example, if you defaulted on a credit card with a given bank 15 years ago, that mistake is likely long gone from your credit reports. To you and the three major credit bureaus, it is ancient history. But banks are like elephants — they never forget. And that mistake could be enough to stop your approval.

But does it go the other way, too? Does having a bank account that’s in good standing with an issuer make you more likely to get approved? While there’s no clear-cut answer, there are a few cases when it could help.

A good relationship may weigh in your favor

Credit card issuers rarely come right out and say much about their approval processes, so we often have to rely on anecdotal evidence to get an idea of what works. That said, you can find a number of stories of folks who have been approved for a credit card they were previously denied for after they opened a savings or checking account with the issuer.

These types of stories are more common at the extreme ends of the card range. If you have a borderline bad credit score, for instance, having a long, positive banking history with the issuer — like no overdrafts or other problems — may weigh in your favor when applying for a credit card. That’s because the bank is able to see that you have regular income and don’t overspend.

Similarly, a healthy savings or investment account with a bank could be a helpful factor when applying for a high-end rewards credit card. This allows the bank to see that you can afford its product and that you have the type of funds required to put some serious spend on it.

Having a good banking relationship with an issuer can be particularly helpful when the economy is questionable and banks are tightening their proverbial pursestrings. When trying to minimize risk, going with applicants you’ve known for years simply makes more sense than starting fresh with a stranger.

Some banks provide targeted offers

Another way having a previous banking relationship with an issuer can help is when you can receive targeted credit card offers. These are sort of like invitations to apply for a card that the bank thinks will be a good fit for you. While approval for targeted offers is still not guaranteed, some types of targeted offers can be almost as good.

For example, the only confirmed way to get around Chase’s 5/24 rule (which is that any card application will be automatically denied if you’ve opened five or more cards in the last 24 months) is to receive a special “just for you” offer through your online Chase account. When these offers show up — they’re marked with a special black star — they will generally lead to an approval, no matter what your current 5/24 status.

Credit unions require membership

For the most part, you aren’t usually required to have a bank account with a particular issuer to get a credit card with that bank. However, there is one big exception: credit unions. Due to the different structure of a credit union vs. a bank, credit unions only offer their products to current members of the credit union.

To become a member, you need to actually have a stake in that credit union. In most cases, this is done by opening a savings account and maintaining a small balance — $5 is a common minimum.

You can only apply for a credit union credit card once you’ve joined, so a bank account is an actual requirement in this case. That said, your chances of being approved once you’re a member aren’t necessarily impacted by how much money you have in the account.

In general, while having a bank account with an issuer may be helpful in some cases, it’s not a cure-all for bad credit. Your credit history will always have more impact than your banking history when it comes to getting approved for a credit card.

For more information on bad credit, check out our guide to learn how to rebuild your credit.

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