 "Primer: Charge Card versus Credit Card")
Customers quite often confuse between the charge card and the credit card to be the same. Charge card can be said very close to credit cards, but it needs outstanding amount to be paid at once on arrival of due date, without any revolving facility. There is no charge levied on the outstanding till due date, subsequently it attracts a penalty up to 5%.
Lets understand this with the help of an example; A bank charges a 4% penalty on total outstanding after the due date(Minimum fine being Rs. 500). Suppose the outstanding is Rs. 20000, then the customer is liable to pay Rs. 800 as a penalty for the delay in payment, however in case of credit card, customers can carry forward such due for payment in the next month.
Some of the Indian banks that are offering charge card to its customers are: American Express, Citi Bank, Axis Bank etc.
Card Transaction Power
The transaction limit of the charge card is not predefined.The The credit history, transaction pattern and personal financial record of client determines the credit limit of a charge card. In credit card, the purchase limit is preset and customers know its usage limitations in advance.
Who is the Customer?
Charge card suits well with a young customer who wants to make a good credit report. Customer can use a charge card with discipline to make a good Credit blueprint that is frequently accessed by the credit bureau. It also helps a card customer to control the spending and avoid debt overburden.
On the other hand, credit cards inculcate borrowing habit in the customer and it can damage the credit profile if not used with extra care.
The absence of revolving facility and lack of installment for outstanding amount can make credit card attractive for the easy going customers but the financially savvy customers would find a charge card to be a better option.
Charge Card and Credit Card Comparison
Though charge card and credit card seem similar in use but there is a significant
Outstanding bill payment
Charge Card: Compulsory to pay every month on the due date
Credit Card: The revolving credit facility allowed
Usage Limit
Charge Card: No predetermined limit. The usage pattern, credit history and financial capacity decide the usage limit.
Credit Card: Predefined credit limit
Effect on CIBIL
Charge Card: It supports in creating a good credit score
Credit Card: An over delayed payment can make the holder damage its credit score.
Other fees
Charge Card: A hefty annual fee is charged. Prepayment of the outstanding bill attracts penalty
Credit Card: Zero annual fee. No penalty for prepayment of due bill.
Who can use?
Charge Card: Suits well for beginners who want to make a good credit history.
Credit Card: Fits well for customers who can use the product tidily without getting into debt trap.
Some Important Points
Important things to remember while using a charge card are:
It carries a hefty annual charge, so it suits for a regular user only.
Charge card charges up to 5% penalty on delay in payment of outstanding bill. So timely payment of due amount is important.
It needs a good credit record to get a charge card.
An overuse of card can put a heavy load at the end of the month so to avoid penalty, it should be used with a proper care.
Finally
Charge card not only allows transaction facility but also develops financial discipline. The charge card has an edge over credit cards when the user is new, young and at the start of its career. The credit card is more suitable for the experienced customers. It is expected that the attractiveness of the charge card would grow significantly
Source: InvestmentYogi is one of the leading personal finance websites in India
Lets understand this with the help of an example; A bank charges a 4% penalty on total outstanding after the due date(Minimum fine being Rs. 500). Suppose the outstanding is Rs. 20000, then the customer is liable to pay Rs. 800 as a penalty for the delay in payment, however in case of credit card, customers can carry forward such due for payment in the next month.
Some of the Indian banks that are offering charge card to its customers are: American Express, Citi Bank, Axis Bank etc.
Card Transaction Power
The transaction limit of the charge card is not predefined.The The credit history, transaction pattern and personal financial record of client determines the credit limit of a charge card. In credit card, the purchase limit is preset and customers know its usage limitations in advance.
Who is the Customer?
Charge card suits well with a young customer who wants to make a good credit report. Customer can use a charge card with discipline to make a good Credit blueprint that is frequently accessed by the credit bureau. It also helps a card customer to control the spending and avoid debt overburden.
On the other hand, credit cards inculcate borrowing habit in the customer and it can damage the credit profile if not used with extra care.
The absence of revolving facility and lack of installment for outstanding amount can make credit card attractive for the easy going customers but the financially savvy customers would find a charge card to be a better option.
Charge Card and Credit Card Comparison
Though charge card and credit card seem similar in use but there is a significant
Outstanding bill payment
Charge Card: Compulsory to pay every month on the due date
Credit Card: The revolving credit facility allowed
Usage Limit
Charge Card: No predetermined limit. The usage pattern, credit history and financial capacity decide the usage limit.
Credit Card: Predefined credit limit
Effect on CIBIL
Charge Card: It supports in creating a good credit score
Credit Card: An over delayed payment can make the holder damage its credit score.
Other fees
Charge Card: A hefty annual fee is charged. Prepayment of the outstanding bill attracts penalty
Credit Card: Zero annual fee. No penalty for prepayment of due bill.
Who can use?
Charge Card: Suits well for beginners who want to make a good credit history.
Credit Card: Fits well for customers who can use the product tidily without getting into debt trap.
Some Important Points
Important things to remember while using a charge card are:
It carries a hefty annual charge, so it suits for a regular user only.
Charge card charges up to 5% penalty on delay in payment of outstanding bill. So timely payment of due amount is important.
It needs a good credit record to get a charge card.
An overuse of card can put a heavy load at the end of the month so to avoid penalty, it should be used with a proper care.
Finally
Charge card not only allows transaction facility but also develops financial discipline. The charge card has an edge over credit cards when the user is new, young and at the start of its career. The credit card is more suitable for the experienced customers. It is expected that the attractiveness of the charge card would grow significantly
Source: InvestmentYogi is one of the leading personal finance websites in India