Deciding which cards deserve a coveted spot in your wallet can sometimes be a tough decision.
There are the essentials, like your ID, and a debit and/or credit card.
But then there’s the slew of other forms of ID, debit/credit cards, gift cards, and loyalty cards you have to choose from.
Here’s something that will make your decision process a little easier.
According to Beth Kobliner’s “Get A Financial Life,” there’s no need to have a charge card in your wallet.
Although charge cards are often lumped in under the category of credit cards, there is actually a crucial difference between the two.
The balance you accumulate up each month on your charge card isn’t limited like a traditional credit line, and must be paid in full at the end of every month. Your purchases are approved as you make them, and, unlike a credit card, you can’t carry a balance that rolls over into next month.
That’s not necessarily a bad thing, since a responsible spender won’t be carrying a credit card balance and paying interest from month to month anyway, but there’s another catch: Charge cards cost annual fees. Considerable fees.
According to Kobliner, these fees go towards perks such as membership and frequent flyer points. Here’s the thing: You can get similar perks with gold and platinum credit cards that don’t charge a $US95 or $US150 annual fee.
So why are charge cards even offered in the first place? Kobliner says they’re a good solution for people who have a hard time keeping their spending in check because you can’t use them to rack up debt. If you can’t be trusted with a credit card, that’s when you might consider a charge instead.
Charge cards aren’t exactly ubiquitous. American Express is the only card issuer that offers charge cards. Diner’s Club used to, but they no longer accept new members, and have since been bought by BMO.
As far as your credit score, charge cards don’t really have an immediate impact — negative or positive. Opening one will help your score over time, but if you’re looking to up your score quickly, you’re better off opening a regular credit card.