topic Re: What’s the deal with Charge Cards? in Credit Cards

What’s the deal with Charge Cards?

Anonymous — Sat, 12 Oct 2019 21:07:55 GMT

Hey all,
I was wondering what all the fuss was about with charge cards, namely Amex.

My very limited understanding on the topic is it is basically like a debit card with points in the sense you have to pay it off each cycle?

It doesn’t necessarily benefit your credit score as there is “no limit” being reported, if I’m correct.

I just don’t see how this is beneficial as opposed to a revolving account?

I know there are plenty of folks with the answers here so I’m expecting a great response.

Re: What’s the deal with Charge Cards?

Anonymous — Sat, 12 Oct 2019 21:19:18 GMT

its not a debt card, debt card requires you to have funding in the account before using it.

Charge card is more like a credit card that you have to pay in full monthly.

Advantage of a charge card is you can put spending on charge card and it will not increase your credit utilization.

Advantage of Amex is separate from the card being a charge card. Many amex charge cards have great earning rate and lot of other perks that worth real values. They are particularly attractive to those who travels.

Re: What’s the deal with Charge Cards?

HeavenOhio — Sat, 12 Oct 2019 21:18:25 GMT

I think the main attraction is the perks that come along with the card.

For most FICO scores, charge cards have no effect on your utilization. The Experian 98 family of scores is an exception. This includes the Experian score used for mortgage lending. One's highest balance is used as a faux limit.

Charge cards affect all versions of FICO when looking at amounts of balances, number of accounts with balances, account age stats, etc.

Re: What’s the deal with Charge Cards?

Brian_Earl_Spilner — Sat, 12 Oct 2019 21:21:33 GMT

It benefits older score versions by letting the highest amount ever charged, be your limit. And yes, some banks still use older score versions.

Since there is technically no limit, you can buy what you want or need, as long as they'll allow it, and you can afford it. And, if given the option, can break a large charge into payments.

Cards like the Platinum give you access to the centurion lounge as well as other perks, like their conceirge service, that isn't available on any of their revolvers.

You can earn boosted points that can be transferred around. If I charge a $200 dinner to my Delta, I get 200 skymiles. If I charge it to a Gold, I get 800 skymiles if I transfer them. Same with flights. $500 flight on a Delta gets me 1000 skymiles, on a Platinum I get 5000 skymiles if I choose to use them that way. Or, I can get a hotel room with those boosted earnings.

And probably the biggest benefit is, you can't accrue debt. You either pay it off, or it gets charged off

Re: What’s the deal with Charge Cards?

Anonymous — Sat, 12 Oct 2019 21:31:23 GMT

Whoa interesting, I didn’t realize the conversion for MR points was better than the co-branded revolvers. Does this hold true for Hilton or Marriot?

Re: What’s the deal with Charge Cards?

CreditInspired — Sat, 12 Oct 2019 21:33:43 GMT

@Anonymous wrote:
its not a debt card, debt card requires you to have funding in the account before using it.
Charge card is more like a credit card that you have to pay in full monthly.

Advantage of a charge card is you can put spending on charge card and it will not increase your credit utilization.

Advantage of Amex is separate from the card being a charge card. Many amex charge cards have great earning rate and lot of other perks that worth real values. They are particularly attractive to those who travels.

^^^ this

And even if one had the funds in their checking account (Debit card) to cover let's say a $4K purchase, it's nice to have 30 days to pay it back on the CC while also earning rewards and covering the spend for the intro bonus too.

Re: What’s the deal with Charge Cards?

Brian_Earl_Spilner — Sat, 12 Oct 2019 21:42:52 GMT

@Anonymous wrote:
Whoa interesting, I didn’t realize the conversion for MR points was better than the co-branded revolvers. Does this hold true for Hilton or Marriot?

It's 1:1 for Marriott, and 1:2 for Hilton.

Re: What’s the deal with Charge Cards?

wasCB14 — Sat, 12 Oct 2019 21:50:26 GMT

To me, Platinum is about travel perks/rewards, various credits, and merchandise/travel protections.

I barely even think about the fact there's a credit product attached.

Re: What’s the deal with Charge Cards?

Anonymous — Sat, 12 Oct 2019 22:06:58 GMT

Charge cards are a bit of a novelty in the only company that broadly issues them is Amex. Now on the business side you have things like a net 30 whcih is basically the same thing for purchasing but, not really a card per se and are individually managed per vendor.

Back to the question at hand though.....

I think that a charge card should be the first option in a build / rebuild due to the nature of how they work... you charge, you pay, you repeat w/o accumulating a balance that carries over every month if you're not PIF minded.

The problem w/ Charge cards is the credit requirements to get one are lofty in comparison to a revolver or secured card someone starting out or starting over would qualify for. Even a seasoned profile can sometimes have an issue getting an Amex issued.

For a new/recovering profile the option to not offer POT would be the risk aversion tehcnique to prevent over spending vs credit rating. New accounts are usually approved per transaction anyway so, there's another stop gap for a riskier profile.

As to the value beyond starting out or putting yourself on a charge / cash PIF diet.... It's going to be geared more towards those with extra cash laying around to pay the AF for the perks that come with the cards. Green doesn't do much other than work well for expense reports that are reimbursed..... which is why the Corporate cards look like the Green.

Gold + $250AF = more perks than just expense reports. -- this middle ground is where you can put some focus on earning points for later redemption if you're.. .well the easiest would be taking people out for lunch/dinner and expensing it @ 4 MR/$ and then taking those points later on to a travel partner through the portal

Platinum + $550AF = even more perks like airline club pases and misc benefits that add up if you're a frequent traveler

Re: What’s the deal with Charge Cards?

Anonymous — Sat, 12 Oct 2019 23:08:21 GMT

@Anonymous wrote:

The problem w/ Charge cards is the credit requirements to get one are lofty in comparison to a revolver or secured card someone starting out or starting over would qualify for. Even a seasoned profile can sometimes have an issue getting an Amex issued.

I don't think that is true in general. For many, an Amex charge card is easier to get certainly than an Amex revolver, but easier than many other revolvers. With the need to PIF each month, Amex's exposure is limited so (generally) underwriting appears easier.

Re: What’s the deal with Charge Cards?

wasCB14 — Sat, 12 Oct 2019 23:47:36 GMT

@Anonymous wrote:
@Anonymous wrote:

The problem w/ Charge cards is the credit requirements to get one are lofty in comparison to a revolver or secured card someone starting out or starting over would qualify for. Even a seasoned profile can sometimes have an issue getting an Amex issued.

I don't think that is true in general. For many, an Amex charge card is easier to get certainly than an Amex revolver, but easier than many other revolvers. With the need to PIF each month, Amex's exposure is limited so (generally) underwriting appears easier.

Keep in mind a lot of those seasoned profiles with "an issue" either:

have an old BK or negative history with Amex, or
already have a few 5-figure Amex CLs

Re: What’s the deal with Charge Cards?

redpat — Sat, 12 Oct 2019 23:49:44 GMT

Homework OP, do your homework about travel perks and Amex MR reward cards.

Re: What’s the deal with Charge Cards?

Anonymous — Sun, 13 Oct 2019 00:16:47 GMT

This is my homework 😒

Re: What’s the deal with Charge Cards?

redpat — Sun, 13 Oct 2019 00:21:39 GMT

@Anonymous wrote:
This is my homework 😒

This would be considered using Cliff Notes......No short cuts, lol!

Re: What’s the deal with Charge Cards?

Anonymous — Sun, 13 Oct 2019 00:55:40 GMT

I run most of my spending through my Gold charge due to the ability to pile up MRs for future use. I have hotel and airline cards, whose points are only and specifically for that particular hotel and airline. Earning MRs means I’m not locked into one option.

As stated above, one big advantage is the ability to run high expenditures without worrying about UTI hits, and it works for the bank, Amex in this case, because the computers reserve the right and ability to approve or decline any charge they like, based on Amex’s comfort level that the customer will repay it - they have essentially active, real-time risk mitigation vs a revolver where they grant a credit line that has no active oversight.

The ability to run whatever charges I want through the card, within my ability to pay, and to earn broadly generalized returns and rewards to use where I want, is the big point for me. My other cards lock me into what I can do with the rewards, but Gold gives me much greater leeway to fit the rewards into whatever use is of most benefit at the time. Im not a baller living on a half million a year by any means, and the annual fee of $250 is heavier than any other fee card I have (my others are $95), but $250 isn’t exactly backbreaking once per year and I can pull more benefit than that from the MRs. And if the $250 actually is that big a deal for someone looking at Gold, in this instance, then perhaps a revolver is a better option than a card requiring PIF monthly.

Re: What’s the deal with Charge Cards?

Anonymous — Sun, 13 Oct 2019 17:27:45 GMT

Thanks for the information guys! It seems like it is something that I would benefit greatly from. Gardening for now and my Amex accounts only shows pre-approved for all co-branded cards but when I decide to app again I am definitely interested in adding a charge card.

MR points seem to be a great value. When green is available again what are your thoughts vs. gold? $250 AF is definitely doable, but $550 is steep considering how much I would use the benefits.

Re: What’s the deal with Charge Cards?

Anonymous — Sun, 13 Oct 2019 17:16:58 GMT

Green will depend on what they offer when it’s rereleased. It was kind of pointless before other than a place to pay to hold MRs (not a great option - Amex ED is a no-AF MR earner). See what it comes with.

Gold is a lifestyle and daily driver card. Platinum is a travel card and if you don’t travel a lot, it’s awfully hard in my mind to justify a $550 AF.

Re: What’s the deal with Charge Cards?

Anonymous — Sun, 13 Oct 2019 17:59:51 GMT

@Anonymous wrote:

Amex in this case, because the computers reserve the right and ability to approve or decline any charge they like, based on Amex’s comfort level that the customer will repay it - they have essentially active, real-time risk mitigation vs a revolver where they grant a credit line that has no active oversight.

I think revolvers have active oversight too, all issuers also reserve the right to decline any charge, consider all the (potential) fraud cases being caught by the issuer. Amex charge almost certainly uses a different algorithm, but revolvers are being watched too!

Re: What’s the deal with Charge Cards?

HeavenOhio — Sun, 13 Oct 2019 18:15:53 GMT

@Anonymous wrote:
As stated above, one big advantage is the ability to run high expenditures without worrying about UTI hits

Unless you're dealing with Experian FICO 98, which is absolutely affected by charge card utilization. And of course, you don't want to blow off the ways that charge card balances can affect all FICO scores.

Re: What’s the deal with Charge Cards?

Anonymous — Sun, 13 Oct 2019 18:31:07 GMT

Of course. My main point was that charging on such a card doesn’t affect the percentages. I could have been more explicit about that.