Compare charge cards
Everything you need to know about charge cards and how they compare to credit cards.
Charge cards can be a convenient way to pay for your shopping online or in-store. They work similarly to credit cards, with your provider paying for the transactions you make and then billing you at the end of the statement cycle. However, there are some key differences between charge cards and credit cards, including payment requirements. Read on to find out how charge cards work and whether they’re the right option for you.
How do charge cards work?
Charge cards have no set spending limit and require that you pay off your full balance by the statement due date, which is usually the end of the month. Credit cards are different, as you only have to repay a small portion, approximately 2-3% of the entire balance each month. As such, a charge card is not a revolving line of credit and does not come with an interest rate. Instead, your provider charges a late fee if you fail to make the full repayment on time. The structure and payment requirements of charge cards also mean they tend to have higher minimum income and credit history requirements than some credit cards.
Charge cards often come with a range of benefits, eg membership rewards; travel insurance; airport lounge access; concierge services and purchase and fraud protection. They usually have high annual fees to offset the cost of these features and reduce the lending risk for issuers.
What types of charge cards are there?
Rewards charge cards
If you want to get something in return for using a charge card, a rewards charge card could be right for you. As well as earning rewards points for every dollar you spend on eligible purchases; these cards offer other perks such as airport lounge access, complimentary insurance and concierge services. Please note, these premium features often come at the cost of a high annual fee.
Gold and platinum charge cards
Gold and platinum charge cards are designed to suit big spenders who are looking for premium perks. Depending on the card, you can benefit from luxury rewards, including fine dining, five-star hotels and elite travel benefits. You also receive higher protection in the form of complimentary insurance cover and platinum concierge services. These cards usually come with higher fees and are best suited to high-income earners.
Business and corporate charge cards
This style of charge card caters to businesses, and the card you choose largely depends on the type of business you own. Business charge cards provide for small businesses, whereas corporate charge cards are for larger corporations. Similar to personal charge cards, business charge cards also come with rewards programs, travel insurance and concierge access. Corporate charge cards may include features for tracking company and travel expenses while offering a degree of flexibility and control over expenses.
How to compare charge cards
Make sure you consider the following factors when you compare charge cards, so that you can find the right option for you.
- Annual fee. This is a yearly fee for maintaining your charge card account. If this fee is very high, make sure it’s offset by incentives and benefits you will use. For example, if you rarely travel, it is not worthwhile paying a high annual fee for a charge card offering premium travel advantages, like airport lounge access and comprehensive travel insurance.
- Minimum income. The minimum income requirement varies between charge cards, with platinum cards requiring a higher annual income than gold cards. Check income requirements for the charge cards you’re considering to find one that suits your current income level.
- Rewards. A card with a good rewards program and high points earning potential can be an excellent way for you to profit from your expenses. Rewards programs vary from card to card, so it’s important to make sure the card you choose allows you to earn and redeem the rewards you want, such as gift cards, Airpoints, and hotel stays.
- Cash advance fee. Where applicable, your provider will charge a cash advance fee for using your charge card to withdraw money. This could be a minimum fee or a percentage fee similar to the cash advance interest fee with credit cards. Please note, this fee is typically much higher than other costs that may apply to charge cards. Not all charge cards allow cash advances, so you need to factor this into your comparison.
- ATM withdrawal fee. If your charge card allows cash advances, this fee may apply on top of the cash advance fee when you withdraw cash from an ATM.
- International transaction fee. This fee is applied to any foreign transactions made on your charge card, whether you’re shopping online or overseas.
- Billing period. This determines when you have to pay off your charge card balance. Usually, you will receive a statement once a month, but some cards may offer more than 30 days between payments. Make sure you check the terms and conditions for your card so you can spend and budget accordingly.
Charge cards vs credit cards
|Feature||Charge cards||Credit cards|
|Card balance||Card balance must be paid in full each month.||Card balance can be carried indefinitely as long as you make a 2-3% monthly minimum repayment.|
|Interest rate||No interest rate but a late fee penalty applies if you do not pay the balance in full.||Interest fees apply for purchases and cash advances.|
|Credit limit||Unspecified credit limit.||Fixed credit limit.|
|Card fees||Annual fees for card usage, and penalty fees when a payment is late. Cash advance, ATM and international transaction fees may also apply.||Annual fees are sometimes waived, but other fees such as ATM, cash advance and international transaction charges may apply.|
|Eligibility requirement||Strict income and high credit rating requirements.||Varying income and credit rating requirements.|
|Credit/loan facility||Charge cards are suitable for spending in the short-term but are not loan facilities.||Credit cards support loan consolidation and allow you to spread repayments over an extended period.|
How to apply for a charge card
Applying for a charge card is simple and can be done online in a few minutes. The eligibility requirements vary from card to card, but some of the general criteria include:
- Age. The age requirement is usually at least 18.
- Citizenship. You typically need to be a New Zealand citizen or permanent resident.
- Annual income. Different cards require varying pre-tax income levels, ranging from $20,000 to $100,000 and above.
- Good credit record. Most charge cards require you to have a high credit rating and no history of bad debt or payment defaults.
Remember, you need to repay the full balance on your charge card every month, and charge cards do not offer the same features as credit cards or other loans. With an unspecific spending limit, you could easily overspend on a charge card and find yourself unable to repay the balance. This can lead to late fees, additional charges and even impact on your credit history. If you are looking to borrow over an extended period, consider a credit card instead.
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