Charge Cards, The Latest Plastic Alternative

American consumers, fed up with their credit cards, have been moving to debit cards in the past few months. This drop in popularity of credit cards has primarily been caused by recent changes credit card companies have been making in their credit card terms to get ahead of the new credit legislation. The result: interest rate hikes, higher fees, new fees and paired down credit. The credit industry has become very consumer-unfriendly, it seems.

Consumers are also very wary with credit cards especially since a lot of them got bit by credit card debt. The biggest concern is the threat of high interest rates which can make credit card debt balloon even with only one missed payment cycle. Debit cards do not have this risk which is why they are getting attention from consumers.

Debit card use among American consumers shot up last year, overtaking credit cards. Consumers considered them to be safer because they did not carry the threat of interest rates. However, consumers soon found out that debit cards carried their own traps as well. A major concern with debit cards is that they are not covered by this new credit legislation which promises extensive consumer protection. This is exactly why card issuers are pushing debit cards instead of credit cards these days.

Debit cards also have overdraft protection. This means that debit card holders can overcharge their cards accidentally and get hit with large overdraft fees. Aside from that, debit cards have lesser fraud protection than credit cards and also offer fewer rewards as well.

Consumers, however, have a third choice. They can go for the new charge card which, at the moment, is mainly being issued by American Express.

Charge cards are quite different from debit and credit cards. The main distinction of charge cards is that card holders are required to pay off balances fully every month. The card also carries no interest rate and has no set spending limits. It is an intriguing proposition for consumers, especially those who are looking for a way to control their credit debt while still maintaining a bit of credit flexibility. However, consumers need to realize that charge cards carry their own headaches as well.

For starters, applying for a charge card at the moment is not very easy. Consumers with low to moderate credit ratings will have to give charge cards a pass. Charge cards also carry annual fees which can range anywhere from $25 to $450. The fee already includes rewards program membership and consumers can pick the perks they want on their charge card which, of course brings the annual fees up.