Welcome to a weekly feature on the Renés Points blog. Each week this series covers in a “rookie” way either a Delta or travel related theme and attempts to break down to a basic level each topic. You can read up on all the previous posts HERE. Now on to this week’s feature.
The above two cards, the non-Delta Platinum American Express cards and the AMEX Premier Rewards Gold cards are Personal Charge cards. OK but just what is a charge card and how is it different from a credit card? I had this question posed recently at the Chicago Seminars and thought I would break it down in a rookie way.
First what is a charge card? Put in the simplest terms, it is a card you must pay off in full each month. Now we should all do this with all of our cards we use, but for the most part with charge cards you must do this unlike a credit card that allows one to carry a balance month to month. There are ways to allow some charge cards to carry a balance, but rather than “muddy up the waters” let’s stick with the stock information.
There are also the slightly more common business charge cards that are very similar to the personal charge cards. Another perk of charge cards is most times there is no preset limit to what you can charge and the amount a bank will allow you to charge more or less month by month or year by year or even depending on if you got a big job and project and want a say make an unusually large (for you) sized purchase in a given month.
Then we have the wide array of personal Credit cards like Delta AMEX cards, Costco card or the SPG card. These are what most folks think of when you talk credit cards. They have a set credit line you are recommend not to go over (I suggest never going over by 50% in a given month). You can, but should not, carry a balance month to month.
Why are these different cards of importance to us? Well, back in the “day”, you could hold a ton of AMEX cards. Today the defacto rule of thumb seems to be a maximum of 4 credit cards. This includes both personal and business total (one example 3 personal 1 biz). However, you can go over this number as charge cards are not included in this limit so you can see the value of mixing up your credit and charge cards.
What about your credit report? What cards help the most. The way it works is simple and I will use simple math. Say you have 4 cards total (I know it’s silly we all have more than that but hang on). Each card has a $2500 limit and they all are credit cards. If you put $5000 on those cards you are using 50% of ALL of your available credit. That does not look good. But, say you have 4 cards and each has $25,000 limits and you put $5000 on them, then you are only using 5% of your credit available and that looks good in proportion. However, many times charge cards, since they really don’t have a set limit, do not add to this equation. Also, with both business credit and charge cards you can have the same results that the numbers are not reported on your personal report. Not a major issue but one to be aware of.
This one may be a bit off topic but needs to be touched on for this post to make things simpler. For now, many times if you go to apply for a consumer AMEX card, and you already have some kind of consumer AMEX card, they will warn you that you will not get the new card bonus. This is not always the case but just beware that it is happening. With business cards, the rule is as it was before. That is you must cancel, wait 365+ days, then you are eligible for the new card bonus again.
Lastly, since we are Delta people, right now AMEX says all 3 Delta AMEX consumer cards are viewed as the same card. That is the Gold or the Platinum or the Reserve. You can only hold one at a time and only get the new card bonus once for any of them. Not the case with the business cards. Each is unique and you can get the bonus for all of them and hold all of them at once if you so wish. They are all credit cards btw!
I hope this rookie posts helps clear up just what a credit vs. charge card is as well as what some of the current rules are for AMEX cards and new card bonus deals! – René
Editorial Note: This content is not provided by American Express. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by American Express.