Even if you qualify for a charge card in Singapore, a credit card might suit you better.
We often don’t use the term charge card and credit card interchangeably - which is good, because there are many differences between the two.
Charge cards are often an option for those with higher income and credit scores, and they provide a different range of benefits. However, even if you qualify for them, you may want to contemplate if you truly need one.
Depending on your spending habits, a credit card might suit you better.
What’s the Difference Between a Charge Card and a Credit Card?
In both cases, they allow you to purchase things at a discount, earn reward points, give you cashback, etc. The key differences are:
- Charge cards have no credit limit
- There is no variable repayment for charge cards
- Credit cards are cheaper
- Credit cards are easier to obtain
- Charge cards have better perks
1. Charge Cards Have No Credit Limit
Credit cards in Singapore typically set a credit limit of two or four times your monthly income. Alternatively, you can fix your own credit limit on the card. For example, your children have supplementary cards, you can request for the bank to cap the credit limit at half your monthly income, so you can control their expenses.
Charge cards do not normally have a limit. Once you have obtained a charge card you could - in theory - swipe it to buy a whole house. But note that charge card limits are not truly unlimited. Beyond a certain point, the card issuer will block further credit.
This is either a pro or a con, depending on how much self-discipline you have. For those who are a spendthrift, a charge card can be disastrous as it’s easy to rack up a monstrous bill. For those with self-discipline, it is convenient not to have to worry about credit limits.
That said, we are hard pressed to think of a situation where a credit limit is inconvenient. It’s not common for a cardholder to buy something that costs two to four times their monthly income anyway.
2. There is No Variable Repayment for Charge Cards
Credit cards allow you to make variable repayment. This means that if you don't repay your credit card in full, you need only pay a minimum amount.
This amount varies from card to card, but it’s somewhere around S$50 or three per cent of the amount owed, whichever is higher. Any remaining sum is subject to interest, at 24 per cent per annum.
Charge cards require you to repay the amount owed in full. There is thus no “interest rate” associated with a charge card. There are, however, harsh penalties for failing to repay the full amount.
In some cases, this will lead to further transactions on the card being blocked, with interest charged on the outstanding amount. The interest rate on a charge card can be extremely high, often up to 30 per cent per annum.
Late payment fees also tend to be higher for charge cards - around S$65, as opposed to around S$45 for late payment on a credit card.
Some cardholders consider this to be an advantage, as it forces them to be disciplined and repay the full amount. At SingSaver.com.sg, we advocate repaying the full amount even on a credit card, in order to avoid interest.
3. Charge Cards Have High Annual Fees
Charge cards are expensive. The American Express Platinum Charge card famously costs USD $450 (around S$610) per year.
This is much higher than a typical credit card, which might cost around $130 per year. Some credit cards even have a lifetime waiver on the fee, such as the ANZ Switch Platinum Credit Card.
4. Credit Cards are Easier to Get
Charge cards tend to be invite-only, whereas anyone can apply for a credit card. In other words, unless a card issuer sends you a letter inviting you to apply for a charge card, you cannot get one.
Charge cards are only offered to people who maintain high credit scores over a course of several years. This is necessary, as a charge card has no preset spending limit. The issuer must be sure the cardholder is responsible. Anyone who has a record of defaults or late payments will probably never get one.
In addition, charge cards are often offered to those with a high income, such as S$15,000 per month or more.
You can get your current credit report by paying S$6 to the Credit Bureau Singapore. If your credit report shows anything other than A, you will have to build up your score before standing a chance.
If your credit report shows anything other than A, you will have to build up your score before standing a chance.
Credit cards can still be obtained if you have a less than perfect credit score (it varies on a case by case basis). Most credit cards are available to you if you earn around S$30,000 per annum or more.
5. Charge Cards Have More Exclusive Perks
Where charge cards have a clear lead is in the area of perks. American Express is most famous for its charge card privileges. The services include a 24-hour global concierge service, which can get you anything from an air ambulance to a restaurant booking in Paris in minutes.
The Amex Platinum Charge card, for example, offers a free Far Card Gourmet Membership worth $598, and access to luxury lounges in over 800 airports worldwide. Perks like these are one of the reasons for the higher annual fee.
These days, however, credit cards come close to charge cards in terms of reward points, cashback, and other privileges. Its credit card counterpart, the Amex Platinum Credit Card, also has a Far Card membership worth S$425 and perks like complimentary green fees at golf courses across Southeast Asia.
Choose the Card That Best Suits Your Spending Habits
Always match the card to your spending.
If you have a tendency to overspend, it’s better to avoid a charge card even if you can get one. The combination of no spending limits, plus harsh penalties for not repaying in full, can lead to expensive consequences. Credit cards, despite their also high interest rates, are more forgiving in this regard.