What is a charge card?

Charge cards let you manage your personal or business spending differently to credit or debit cards. Here is how they work and everything else you need to know about them.
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What are charge cards?

Charge cards are similar to credit cards, but they work in a different way. 

Although you can spend on a charge card in just the same way as a credit card, they differ because you must pay off your card balance in full every single month. You cannot carry over a balance from month to month.

Are charge cards the same as credit cards?

No. The difference is that charge cards do not let you borrow money over several months or spread the cost of purchases as you would be able to with a credit card. You have to repay the entire balance owed in full each month.

Credit cards offer more flexibility and allow you to repay the amount you’ve spent on the card over a series of monthly repayments. You can choose how much you want to pay each month, so long as it is at least the minimum amount printed on your monthly statement. If you don’t clear your balance in full, interest will usually be charged.

In comparison, charge cards are not advertised with interest rates because your balance should never roll over into the next month.

Another difference is that unlike credit cards, charge cards do not usually come with limits on what you can spend each month. This means you know the card will be able to cover the cost when you spend on it.

Where can you use charge cards?

Charge cards are not as widely accepted as credit cards, so you’ll need to check or make sure you have an alternative payment method with you. You may be able to use your card:

  • In certain shops, restaurants or other businesses

  • Online

  • In cash machines

  • Over the phone

  • In other countries

  • Using mail order services

Who offers charge cards? 

The charge card market isn’t huge, but you’ll be able to find options with certain banks and card providers, particularly if you’re an existing customer. One of the biggest charge card providers is American Express.

How much do charge cards cost?

Although charge cards do not have an interest rate, they will charge various fees. These include: 

  • Annual fees: These can cost hundreds of pounds each year, but some offer lower fees or no fee for the first year.

  • Cash withdrawal fees: A percentage of the amount you withdraw, often with a minimum charge of around £3.

  • Fees for spending abroad: A percentage of what you spend, and they sometimes come with a minimum charge of around £3.

Penalties for late payment

If you do not repay your balance in full by its due date you could be charged:

  • A fixed late payment fee of around £15

  • A percentage of the amount due (eg 3.5%), charged every month until you pay it off

  • Interest charged at a rate higher than most credit cards

  • A fee of around £20 if your payment bounces

  • A fee of around £10 every time the card company write to you to chase a missed payment

Your card could also be cancelled and your credit record will be affected if you miss any repayments.

Do charge cards offer any benefits? 

Many charge cards offer a range of rewards, although those with the most rewards tend to have highest annual fees. , Rewards can include:

  • Travel insurance

  • Reward schemes like shopping vouchers

  • Breakdown cover

  • Discount schemes

  • Cashback

  • Golf club membership

  • Concierge services

  • Airport lounge access

Charge cards do not offer the Section 75 protection that credit cards offer, but they may offer their own purchase protection or extended warranty cover instead. 

Who can get a charge card?

Charge cards are primarily aimed for those with a high income or for businesses charging the company account. 

Many charge cards will only accept you if you earn more than their minimum amount (e.g. £60,000) and have a strong credit record.

Businesses can issue several cards to their employees and keep track of what each one has spent when they pay them off each month. As long as repayments are made in full there will be no interest charges and debts on the card.

Some cards even offer detailed management information, which includes reports, patterns and statistics on spending.

How to get a charge card

As with any type of plastic, to find the best deal you’ll need to shop around and compare your options. This includes checking the annual fee and looking at the  benefits each card offers. You’ll need to work out if you would use the benefits and if they are worth the fee the card charges.

If you think you could ever miss a repayment or would want to use the card to borrow, a credit card could work out much cheaper. This guide explains how to choose the right type of credit card.

What are the pros and cons of charge cards?

Before choosing a charge card, it’s important to weigh up the pros and cons:

Pros

  • No interest to pay 

  • There is usually no credit limit

  • Little chance of getting into debt

  • Many offer reward or discount schemes

  • They can help businesses monitor spending

Cons

  • Your balance must be repaid in full each month

  • Most have high annual fees

  • There is no Section 75 protection

  • Fees apply for missed payments

  • Not accepted everywhere

  • You’ll need a high income and good credit score to qualify

Find the best credit card for you, whether you're looking for 0% card for balance transfers or purchases or day to day spending and rewards