topic Re: Why are charge cards not more popular? in Credit Cards

Why are charge cards not more popular?

arkane — Wed, 04 Jul 2018 04:56:36 GMT

A philosophical question more than anything, but as I was replying to another thread regarding interest charges and what not, it got me thinking why charge cards never really took off.

Is it because banks simply found them too unprofitable? After all why only collect swipe fees when you can capitalize on people's need for instant gratification and charge usurious interest rates! Or is it because our spending habits are such that charge cards would've had limited exposure if they always required PIF each month, as opposed to allowing one to revolve the debt month after month so long as minimum payments are met?

Re: Why are charge cards not more popular?

NRB525 — Wed, 04 Jul 2018 05:02:01 GMT

Are there any Charge Cards that do not have annual fees?

Charge Cards actually are very popular... with corporations who want to authorize employees to pay for travel in a standard way, or authorize small corporate purchases (P-Cards) to enable local logitical / purchasing activities without a lot of red tape to issue Purchase Orders and get credit from merchants. This Corporate card activity is a huge share of AMEX's business model.

Re: Why are charge cards not more popular?

arkane — Wed, 04 Jul 2018 05:13:55 GMT

I can't think of any charge cards without AFs, but then again nobody except Amex and Diners Club issue personal charge cards these days. I'd like to think if every bank had a charge card (and thus competition), we'd definitely see some no AF charge cards.

Re: Why are charge cards not more popular?

wasCB14 — Wed, 04 Jul 2018 05:32:59 GMT

Thought I'd add some Amex financial info. As of 3/31/18

Card member loans (revolver balances plus charge card POT) less reserves: $71.03 billion

Card member receivables (charge card balances other than POT) less reserves: $52.68 billion

Considering that some people will not PIF on revolvers, and others will use POT on charge cards, the loan balance is going to reflect balances from a longer period of transactions.

The point being: Charge cards may easily represent half or more of Amex spend. Of course, much of that is business and corporate spend.

I think there was some Chase Ink charge card years ago, but that it got closed to new apps or discontinued.

Re: Why are charge cards not more popular?

NRB525 — Wed, 04 Jul 2018 05:31:36 GMT

The advantage of a credit card limit, the bank is specifically telling the customer the max limit. It is also a risk control method for the bank.

VISA Sig, VISA Infinite, World MC, WEMC, all have attributes of a charge card, with that mid-level Carried Balance limit. Quality customers may be able to go over limit, with PIF expected.

So the “here is your limit” features of a credit card are easier to explain to customers. Even AMEX tries to make it more plain on the PRG statement what the cardholders Pay Over Time limit is.

Because ultimately all cards have a spending limit.

Re: Why are charge cards not more popular?

pipeguy — Wed, 04 Jul 2018 05:43:53 GMT

I suspect it is because for consumers, many think it's spendable money (their credit limit) and the lenders business model is much more profitable with monthly compounded interest charged. As far as the consumer, it's spend now pay later with little thought to the added interest. Based on the statistics I've seen only 30% or so of consumers pay in full each month which means billions of dollars earned through high-interest rates - nice business model profit-wise (in addition to the fact that most consumer debt is packaged into highly profitable bonds) and the average consumer loves it!

Re: Why are charge cards not more popular?

arkane — Wed, 04 Jul 2018 06:07:07 GMT

@pipeguy wrote:
I suspect it is because for consumers, many think it's spendable money (their credit limit) and the lenders business model is much more profitable with monthly compounded interest charged. As far as the consumer, it's spend now pay later with little thought to the added interest. Based on the statistics I've seen only 30% or so of consumers pay in full each month which means billions of dollars earned through high-interest rates - nice business model profit-wise (in addition to the fact that most consumer debt is packaged into highly profitable bonds) and the average consumer loves it!

Yep agreed. As I alluded to in my OP allowing consumers to float their debt month to month whilst charging ridiculous rates is much more profitable than forcing them to PIF and charging late fees if they don't.

As to the part in bold, the numbers seem to swing wildly depending on who's compiling the numbers. For example here they actually show only 39% carry a balance month to month: https://www.nfcc.org/clientimpact/2017-financial-literacy-survey/

But if you look to the CFPB survey, it's exactly the opposite with only 39% "always" PIF each month:

Re: Why are charge cards not more popular?

wasCB14 — Wed, 04 Jul 2018 06:42:48 GMT

@NRB525 wrote:
The advantage of a credit card limit, the bank is specifically telling the customer the max limit. It is also a risk control method for the bank.

VISA Sig, VISA Infinite, World MC, WEMC, all have attributes of a charge card, with that mid-level Carried Balance limit. Quality customers may be able to go over limit, with PIF expected.

So the “here is your limit” features of a credit card are easier to explain to customers. Even AMEX tries to make it more plain on the PRG statement what the cardholders Pay Over Time limit is.

Because ultimately all cards have a spending limit.

Chase (and maybe other banks) have let some customers exceed nominal CLs since before Visa Signature was a thing (or at least was common, and on said accounts.).

I took my $9k CL BBP up to $17k recently. All it generated was a reminder email of how the payment would be calculated. Strict maximum limits do seem to be increasingly limited to starter and slightly-better cards.

Re: Why are charge cards not more popular?

Anonymous — Wed, 04 Jul 2018 10:35:30 GMT

@arkane wrote:
A philosophical question more than anything, but as I was replying to another thread regarding interest charges and what not, it got me thinking why charge cards never really took off.

Is it because banks simply found them too unprofitable? After all why only collect swipe fees when you can capitalize on people's need for instant gratification and charge usurious interest rates! Or is it because our spending habits are such that charge cards would've had limited exposure if they always required PIF each month, as opposed to allowing one to revolve the debt month after month so long as minimum payments are met?

Charge cards are not "more popular" for one major reason: lack of flexibility.

With charge cards, you must pay in full each month.
With credit limit cards, you can pay in full each month,
but you don't have to. The option of carrying a balance
in exchange for consumers being able to control how much
interest they pay is what makes credit limit cards "more popular."

In short, life gets in the way. Since none of us can predict exactly
what's going to happen in our lives, choosing limit cards instead
of charge cards speaks to the old adage that the best way to solve
a problem is not to create one in the first place. So if paying in full
and not being charged interest is most important, charge cards are
your best bet. But if you want the best of both worlds, limit cards are
the answer. And in the case of American Express, they could see very
plainly that not offering credit limit cards meant leaving billions of $$$
on the table, which is why they now offer both cards. Just my 2 cents...

P.S. One other thing: FICO scoring algorithms have changed as well.
If you pay in full and leave a 0 balance, this makes FICO believe that
you're not using your card so your scores will actually go down. But if
you employ the AZEO method to credit card management and leave
a balance of 8.9% or less on one of your cards, then your scores will
rise over time. Charge cards command a 0 balance each month,
but credit limit cards do not, which is another reason limit cards
are growing in popularity.

Re: Why are charge cards not more popular?

AverageJoesCredit — Wed, 04 Jul 2018 11:23:46 GMT

You know Joe Q Public, they like to carry their Revolvers bang bang buddy

Re: Why are charge cards not more popular?

wasCB14 — Wed, 04 Jul 2018 11:56:08 GMT

@Anonymous wrote:
Charge cards are not "more popular" for one major reason: lack of flexibility.

With charge cards, you must pay in full each month.
With credit limit cards, you can pay in full each month,
but you don't have to. The option of carrying a balance
in exchange for consumers being able to control how much
interest they pay is what makes credit limit cards "more popular."

In short, life gets in the way. Since none of us can predict exactly
what's going to happen in our lives, choosing limit cards instead
of charge cards speaks to the old adage that the best way to solve
a problem is not to create one in the first place. So if paying in full
and not being charged interest is most important, charge cards are
your best bet. But if you want the best of both worlds, limit cards are
the answer. And in the case of American Express, they could see very
plainly that not offering credit limit cards meant leaving billions of $$$
on the table, which is why they now offer both cards. Just my 2 cents...

P.S. One other thing: FICO scoring algorithms have changed as well.
If you pay in full and leave a 0 balance, this makes FICO believe that
you're not using your card so your scores will actually go down. But if
you employ the AZEO method to credit card management and leave
a balance of 8.9% or less on one of your cards, then your scores will
rise over time. Charge cards command a 0 balance each month,
but credit limit cards do not, which is another reason limit cards
are growing in popularity.

By the time someone is:

-Paying $550 on Platinum for travel perks

-Paying $195 on PRG for travel rewards

-Paying $95 or $160 for Green/Gold for...whatever

...I would hope he or she has enough financial security to not be living paycheck to paycheck.

Re: Why are charge cards not more popular?

redpat — Wed, 04 Jul 2018 12:08:58 GMT

@Anonymous wrote:
@arkane wrote:
A philosophical question more than anything, but as I was replying to another thread regarding interest charges and what not, it got me thinking why charge cards never really took off.

Is it because banks simply found them too unprofitable? After all why only collect swipe fees when you can capitalize on people's need for instant gratification and charge usurious interest rates! Or is it because our spending habits are such that charge cards would've had limited exposure if they always required PIF each month, as opposed to allowing one to revolve the debt month after month so long as minimum payments are met?

Charge cards are not "more popular" for one major reason: lack of flexibility.

With charge cards, you must pay in full each month.
With credit limit cards, you can pay in full each month,
but you don't have to. The option of carrying a balance
in exchange for consumers being able to control how much
interest they pay is what makes credit limit cards "more popular."

In short, life gets in the way. Since none of us can predict exactly
what's going to happen in our lives, choosing limit cards instead
of charge cards speaks to the old adage that the best way to solve
a problem is not to create one in the first place. So if paying in full
and not being charged interest is most important, charge cards are
your best bet. But if you want the best of both worlds, limit cards are
the answer. And in the case of American Express, they could see very
plainly that not offering credit limit cards meant leaving billions of $$$
on the table, which is why they now offer both cards. Just my 2 cents...

P.S. One other thing: FICO scoring algorithms have changed as well.
If you pay in full and leave a 0 balance, this makes FICO believe that
you're not using your card so your scores will actually go down. But if
you employ the AZEO method to credit card management and leave
a balance of 8.9% or less on one of your cards, then your scores will
rise over time. Charge cards command a 0 balance each month,
but credit limit cards do not, which is another reason limit cards
are growing in popularity.

Totally disagree. Charges are very popular which is why Amex plat is the best travel card. I really don’t care for AZEO and most don’t. SUBs, travel perks, Amex MR Offers, 5x airfare and 35% rebate on redemptions are the reasons I have them.

Re: Why are charge cards not more popular?

Anonymous — Wed, 04 Jul 2018 12:43:43 GMT

@wasCB14 wrote:
@Anonymous wrote:
Charge cards are not "more popular" for one major reason: lack of flexibility.

With charge cards, you must pay in full each month.
With credit limit cards, you can pay in full each month,
but you don't have to. The option of carrying a balance
in exchange for consumers being able to control how much
interest they pay is what makes credit limit cards "more popular."

In short, life gets in the way. Since none of us can predict exactly
what's going to happen in our lives, choosing limit cards instead
of charge cards speaks to the old adage that the best way to solve
a problem is not to create one in the first place. So if paying in full
and not being charged interest is most important, charge cards are
your best bet. But if you want the best of both worlds, limit cards are
the answer. And in the case of American Express, they could see very
plainly that not offering credit limit cards meant leaving billions of $$$
on the table, which is why they now offer both cards. Just my 2 cents...

P.S. One other thing: FICO scoring algorithms have changed as well.
If you pay in full and leave a 0 balance, this makes FICO believe that
you're not using your card so your scores will actually go down. But if
you employ the AZEO method to credit card management and leave
a balance of 8.9% or less on one of your cards, then your scores will
rise over time. Charge cards command a 0 balance each month,
but credit limit cards do not, which is another reason limit cards
are growing in popularity.

By the time someone is:
-Paying $550 on Platinum for travel perks
-Paying $195 on PRG for travel rewards
-Paying $95 or $160 for Green/Gold for...whatever

...I would hope he or she has enough financial security to not be living paycheck to paycheck.

"Living paycheck to paycheck" has nothing to do with choosing charge cards over limit cards.

Charge card folks traditionally don't want to carry a balance, so they pay in full every month.

Limit card folks don't wanna be boxed into being forced to pay in full each and every month.

And sure, the perks are great for both limit cards and charge cards. But after the perks

are all gone, what then? You're off to the next card chasing their perks as well.

That's fine if that's what you want. But fundamentally speaking, charge card folks don't

live paycheck to paycheck. They just don't want to put themselves in a position to carry

a balance.

Re: Why are charge cards not more popular?

wasCB14 — Wed, 04 Jul 2018 13:32:01 GMT

@Anonymous wrote:
@wasCB14 wrote:

By the time someone is:
-Paying $550 on Platinum for travel perks
-Paying $195 on PRG for travel rewards
-Paying $95 or $160 for Green/Gold for...whatever

...I would hope he or she has enough financial security to not be living paycheck to paycheck.
"Living paycheck to paycheck" has nothing to do with choosing charge cards over limit cards.
Charge card folks traditionally don't want to carry a balance, so they pay in full every month.
Limit card folks don't wanna be boxed into being forced to pay in full each and every month.

And sure, the perks are great for both limit cards and charge cards. But after the perks
are all gone, what then? You're off to the next card chasing their perks as well.
That's fine if that's what you want. But fundamentally speaking, charge card folks don't
live paycheck to paycheck. They just don't want to put themselves in a position to carry
a balance.

People who can pay their bills get whatever cards they find useful (whether charge or credit) because they are eligible for just about anything they want. They PIF if required (or facing a high APR), or carry at 0% or some very low APR.

I have a Platinum because I use the travel perks and purchase protections. The fact that I can't (apart from EPO/POT/whatever) carry a balance on it just isn't a factor for me, for good or bad. *I'm not a charge card person or a credit card person...I just get whatever products I'm eligible for that I find useful.

I'm not quite sure what you mean with your last paragraph.

*To clarify, it sounds like you describe premium perks as either a common feature or a depleting resource that must be constantly replenished. Bonuses get depleted, but with my Platinum I'm not really "off to the next card chasing their perks". I have what I want and I keep the card, continuing to use the perks. Perks change over time and some are removed, but others are added.

Re: Why are charge cards not more popular?

Anonymous — Wed, 04 Jul 2018 13:29:02 GMT

Most people don't even understand the differences between a charge card and a credit card. Most people put charge, credit, and debit cards under the same blanket by referring to them all as "credit cards." Based on real world experience, most people simply see "$195 annual fee" and say, "no thanks." They don't understand why a charge card has an annual fee and how to get more than that back in perks and rewards. I did it myself before I really started looking into the useful features of what a charge card can offer.

American Express has ruined the uniqueness of the charge card over the last couple of years with pay over time and such. If someone wants to revolve a balance, apply for a credit card, not a charge card. I think most people should have a charge card because it would be healthier for our economy -- people wouldn't carry a balance (or debt) and pay $4,000 a year in interest charges.

Re: Why are charge cards not more popular?

wasCB14 — Wed, 04 Jul 2018 13:45:36 GMT

@Anonymous wrote:
Most people don't even understand the differences between a charge card and a credit card. Most people put charge, credit, and debit cards under the same blanket by referring to them all as "credit cards." Based on real world experience, most people simply see "$195 annual fee" and say, "no thanks." They don't understand why a charge card has an annual fee and how to get more than that back in perks and rewards. I did it myself before I really started looking into the useful features of what a charge card can offer.

American Express has ruined the uniqueness of the charge card over the last couple of years with pay over time and such. If someone wants to revolve a balance, apply for a credit card, not a charge card. I think most people should have a charge card because it would be healthier for our economy -- people wouldn't carry a balance (or debt) and pay $4,000 a year in interest charges.

If you had an Amex charge card, how exactly would your experience suffer due to the fact that someone else used POT?

Re: Why are charge cards not more popular?

Anonymous — Wed, 04 Jul 2018 13:49:04 GMT

@wasCB14 wrote:
@Anonymous wrote:
Most people don't even understand the differences between a charge card and a credit card. Most people put charge, credit, and debit cards under the same blanket by referring to them all as "credit cards." Based on real world experience, most people simply see "$195 annual fee" and say, "no thanks." They don't understand why a charge card has an annual fee and how to get more than that back in perks and rewards. I did it myself before I really started looking into the useful features of what a charge card can offer.

American Express has ruined the uniqueness of the charge card over the last couple of years with pay over time and such. If someone wants to revolve a balance, apply for a credit card, not a charge card. I think most people should have a charge card because it would be healthier for our economy -- people wouldn't carry a balance (or debt) and pay $4,000 a year in interest charges.
If you had an Amex charge card, how exactly would your experience suffer due to the fact that someone else used POT?

I like being forced to pay in full rather than being able to opt in to a balance carrying feature.

I like traditional AMEX more than the current AMEX.

Re: Why are charge cards not more popular?

sarge12 — Wed, 04 Jul 2018 14:00:53 GMT

@arkane wrote:
A philosophical question more than anything, but as I was replying to another thread regarding interest charges and what not, it got me thinking why charge cards never really took off.

Is it because banks simply found them too unprofitable? After all why only collect swipe fees when you can capitalize on people's need for instant gratification and charge usurious interest rates! Or is it because our spending habits are such that charge cards would've had limited exposure if they always required PIF each month, as opposed to allowing one to revolve the debt month after month so long as minimum payments are met?

If you ever learned the hard way, you treat credit cards the same as charge cards...PIF...every...single....month! Credit cards can be a convenience, extend warranties, and get you rewards, or they can be a revolving road to ruin!!!

Re: Why are charge cards not more popular?

wasCB14 — Wed, 04 Jul 2018 14:06:42 GMT

@Anonymous wrote:
@wasCB14 wrote:
If you had an Amex charge card, how exactly would your experience suffer due to the fact that someone else used POT?
I like being forced to pay in full rather than being able to opt in to a balance carrying feature.

I like traditional AMEX more than the current AMEX.

You said the other day you're carrying a balance at 0% on BBP. If you want to be forced to pay in full, miss a few payments on the account and maybe they'll start demanding you PIF pretty soon!

Re: Why are charge cards not more popular?

Anonymous — Wed, 04 Jul 2018 15:02:05 GMT

@wasCB14 wrote:
@Anonymous wrote:
@wasCB14 wrote:
If you had an Amex charge card, how exactly would your experience suffer due to the fact that someone else used POT?
I like being forced to pay in full rather than being able to opt in to a balance carrying feature.

I like traditional AMEX more than the current AMEX.
You said the other day you're carrying a balance at 0% on BBP. If you want to be forced to pay in full, miss a few payments on the account and maybe they'll start demanding you PIF pretty soon!

Except I signed up for the BBP recognizing I may carry a balance if I want to.