The other day, I was getting ready to pay for my groceries, when I realized that I've never written about the type of plastic that I use most often -- the charge card. First let me define a charge card: they look like debit and credit cards, but you're required to pay off your balance in full at the end of each month before you can use it again. The most widely known one is probably the American Express Green Card. So, I'm going to give you three reasons why I like charge cards over debit and credit cards.
1.) Charge cards force you to use plastic in the best possible way: I've always felt that debit and charge cards can be your friend or your foe depending entirely on how you use them. My argument has always been that the right way is to only charge items that you can afford (and will) pay off in full when the bill comes in at the end of the month. If used properly, plastic becomes a convenience tool that can help you both manage your cash flow and keep you from lugging around wads of cash. The beauty of a charge card is that you're forced to pay off the bill at the end of each month. You can't leave a balance due on that card.
2.) Charge cards help you build up your credit score: Your credit score is a three-digit number that summarizes your financial reputation. It's important to have a good one because it will determine how much you're charged to borrow money. I hear a lot of people talk about using cash only for purchases to help reign in their spending. However, when you pay for items with cash or a debit card, this activity doesn't get added to your credit report. When you pay with a charge card, it does. While I always support reigning in spending, I do worry that the prolonged use of cash or debit only will negatively impact credit scores. Charge cards help you establish a credit history without the temptations to overspend that come with credit cards.
3.) Charge cards give you extra protection: Again, while I love the intent behind paying with cash or a debit card that kind of mindset can leave you vulnerable. In exchange for paying an annual fee on a charge card, you typically get a bevy of consumer protections ranging from extended warranties on items you purchase, to rental car insurance, to dispute resolution.
That's why I use a charge card as my primary card and a credit card just as a backup. However, no matter what type of plastic you use, I strongly recommend you keep it to three pieces max. One for your primary card, one for a emergencies, and one for business expenses that you want to keep separate for accounting purposes. When it comes to your personal finances, I firmly believe simple is better.
For more advice on building good credit, visit Military.com's Credit/Debt center.