Find the best credit card offers online.Charge cards are making a comeback as American Express (AmEx) re-introduces them as an option for consumers who want to pay with plastic without losing control of their credit debt. Currently, AmEx is the main issuer of charge cards.
Unlike credit cards, charge cards require holders to fully pay off their credit balances every month. Thus, there is no risk of incurring interest penalties which is why charge cards carry no interest rates. Charge cards therefore present a perfect opportunity for AmEx to exploit the discontent of consumers disillusioned by credit card debt. As intriguing as charge cards are, they are not for everyone.
Not just anyone can qualify for a charge card. AmEx has stayed mum on their approval standards for charge cards, but it is safe to say that consumers will need an impressive credit standing to qualify. Thus, those who are still trying to pull up their credit scores will have to give charge cards a pass.
Charge card holders will also have to pay annual fees. AmEx charge cards carry annual fees starting at $25 and going up to $450. The amount of the fee depends on perks that the card holder decides upon. The company’s Zync card carries the lowest fee which is $25. Zync cards are targeted to consumers between 20 and 30 years old. Zync card additional perks will be an extra $20.
Whether the annual fees of charge cards are worth it or not depends greatly on how a consumer spends. Ideally, consumers should see if their spending habits allow them to earn enough reward points to balance out its annual fee.
Another concern is the impact that charge cards will have on credit scores. In terms of credit history, charge cards are treated as revolving credit, same as credit cards. However, there is a possible problem with credit utilization reporting. Credit utilization reports is the ratio of how much available credit a consumer has and how much debt he carries. It makes up for 30% of a consumer’s score.
The problem is that charge cards do not publish their spending limits. An old scoring model solves the problem by using the highest balance that the card has seen and using that amount as the limit. Consumers who charge generally the same amount every month would seem to be utilizing 100% of their credit. This practice is, however, not the rule among credit reporting organizations. Notably, FICO, the company which makes the most commonly used credit scores, said that charge card utilization is not a factor in their new scoring models.
