Personal Finance

Charge cards make a comeback

Srividhya Sivakumar | Updated on May 28, 2011 Published on May 28, 2011

Want an option apart from your regular debit and credit card? Get the best of both with charge cards.

Does the credit of credit bother you? And at the same time you are not keen on swiping your debit card either? Time to consider charge cards which offer the best of both these worlds. Charge cards can be swiped just like a credit card or debit card for all your transactions. However, they don't offer revolving credit like the credit card and don't debit your bank account immediately like the debit card! A good middle-of-the-road option for those averse to the idea of credit.

American Express, the largest player in the charge-card space worldwide, has re-launched its Gold Charge Card in India early this year. But before we talk about the Gold Charge Card, let's first look at the basic features of a charge card.

Best of both worlds

If you don't want revolving credit and believe in paying up your credit card bills in full and on time, charge cards make a good option. These cards require you to settle your bill in full by the due date each month. What's more, they even reward good financial behaviour with ‘points' and more credit limit.

Charge cards score over debit cards too as it doesn't debit your bank account instantly against the transaction. Instead, it offers you up to 51 days of interest-free period!

These cards also do not come with any pre-set spending limits. It also lets you receive membership reward points and keep a track of your spending while giving away key benefits such as insurance, security etc.

Charge cards make a good option if you need to develop financial discipline as well. They are, therefore, especially well-suited for young professionals.

These cards also allow young consumers to build or improve their credit history as all charge card transactions are captured by the credit bureau.

Debit card activity, in contrast, isn't reported to the credit bureau. A good credit history for young professionals would come in handy in getting the much-needed loan approvals (home/car/personal) from banks in future. These cards, however, require you to pay an annual subscription fee.

American Express Gold Card

Targeted at young affluent (between in the age group of 28-35 years), the Gold Charge Card, at its core, offers very attractive points earning potential. However, a minimum income of Rs 8 lakh per annum besides a decent credit history is a must to become eligible to own this card.

The card offers an interest-free credit period of up to 52 days. As for the annual subscription fee, while (part of the inaugural offer) the card comes free for the first year (in 2011), it will attract an annuity fee of Rs 4,500 each year after that.

The American Express Gold Card comes with an in-built intelligence that recognises the card holder's spending needs and adjusts accordingly.

The credit limit therefore isn't static like what's offered by credit cards. Instead, the charge card offers a dynamic limit, while rewarding good payment behaviour.

The card also comes loaded with very attractive rewards programs. For instance, the American Express Gold card holders would earn 12,000 points a year for simply using it four times a month. In addition, card holders can earn 2.5 points for every Rs 100 spent on the card.

What's more, they get 5000 bonus points for renewing their card membership. The points can be converted to win a selection of premium brand products and services like a Tissot Watch, Sony PlayStation and Apple iPod (25,000 points each needed to win these). The points can also be converted into air miles for complimentary tickets. Note that the points you earn don't come with an expiry date.

Zero lost card liability, 24 hour helpline, emergency card replacement and internet fraud protection are some of the other perks that you are entitled to.

However, in case of non-payment, incremental transactions on the card would be blocked and a late payment charge of 5 per cent on the unpaid balance would be levied.

Our take

If you already own a credit card and are looking for alternatives, the card makes a good addition to your wallet. For the first-time credit card owner, the relatively limited merchant network of American Express may be a bit of a dampener. The card, however, offers a neat alternative to frequent debit card users.

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