Whether you have a credit card or not, it pays to know the alternatives, if you have a card, you might have heard the term charge card before. However, many people don't really know the difference between a charge card and a credit card, and what the benefits and drawbacks of a charge card are. If you want to know more about charge cards then here are some useful tips to get you started.

What is a charge card?

A charge card is a plastic card much like a credit card, in that you can pay for goods and withdraw money using the card. However, unlike credit cards, the balance of a charge card has to be settled in full each month. The most common examples of charge cards are American Express and Diners Club cards, as well as some gold cards.

Paying the balance in full

The main feature of a charge card is that you have to pay the balance off in full each month. If you currently have a credit card and pay your balance off each month, then having a charge card would be very similar to this. Settling the balance each month means that you can budget an exact amount that you can afford to spend. However, you must remember that if you cannot pay off the balance then the penalty interest will be much higher than a normal credit card.

No limits

Another feature of charge cards is that there are no real pre-set spending limits on the card, meaning in theory you can spend what you want on it. This is brilliant if you can afford to pay off large amounts each month, but can be disastrous if you are not disciplined. You could easily run up very large debts that you have no means of paying off at the end of the month. However, having no limit is useful in an emergency because it gives you more flexibility.

Benefits

Although charge card bills need to be settled each month, many people get charge cards because of the excellent benefits that they offer their customers. Although benefits differ from card to card, privileges can include free travel insurance, as well as access to business lounges in airports. Charge cards are a good tool for people who travel around a lot and want to be comfortable wherever they go.

Not always accepted

One of the main disadvantages of charge cards is that they are not as widely accepted as Visa or MasterCard credit cards. This is because charge card issuers charge a higher percentage to businesses, meaning that a number of them are unwilling to allow purchases with these cards.

Who should get charge cards?

Getting a charge card is really a personal choice, although people who find it hard to budget should not get a charge card. However, if you can afford to pay off the balance in full each month and want to have a card that gives you a large number of benefits, then a charge card might be for you.