Charge cards are similar to standard credit cards, but with one or two significant exceptions.
You don’t see charge cards much anymore. Today, one of the only major providers still offering them is American Express, while almost all other issuers stick to credit cards. But charge cards haven’t died off yet. In fact, there are still a few excellent ones out there.
The benefits of charge cards include flexibility over payments (purchases at the start of the billing cycle are paid for at the end of the billing cycle) and in some cases, rewards on your spending. Charge cards normally come with a monthly or annual fee attached, though don’t offer purchase protection under section 75 of the Consumer Credit Act.
Here’s how charge cards work and how to decide if they’re a smart option for you.
How do charge cards work?
Charge cards have no set spending limit and require you to pay your full balance off by the statement due date, which is usually the end of the month. This is different to credit cards, where you only have to repay a small portion, usually about 2–4% 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, you’ll be charged a late fee if you fail to make the full repayment on time. The structure and payment requirements of charge cards also means they tend to have higher minimum income and credit history requirements than some credit cards.
Charge cards often come with a range of benefits such as membership rewards, travel insurance, airport lounge access, concierge services and purchase and fraud protection. They also usually have high annual fees to offset the cost of these features and reduce the lending risk for issuers.
Compare charge cards
Approval for any credit card will depend on your status. The APR shown represents the interest rate offered to most successful applicants. Depending on your personal circumstances the APR you're offered may be higher, or you may not be offered credit at all. Fees and rates are subject to change without notice. It's always wise to check the terms of any deal before you borrow.
Card balance must be paid in full each month. Card balance can be carried indefinitely as long as 2–4% monthly minimum repayment is made.
|Charge cards||Credit cards|
|Interest rate||No interest rate but a late fee penalty applies if the balance is not paid 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.|
What types of charge cards are out there?
- Rewards charge cards. If you want to get something back for using your charge card, a rewards charge card could be right for you. As well as earning reward points for every pound 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 looking for premium perks. Depending on the card, you could get luxury rewards including fine dining, 5-star hotels and elite travel benefits. You’ll also receive higher protection in the form of high complimentary insurance covers and platinum concierge services. These cards usually come with higher fees and are best suited to high income earners.
- Business and corporate charge cards. The type of card you choose should largely depend on the type of business you own. Business charge cards cater for small businesses whereas corporate charge cards cater for larger corporations. Similar to personal charge cards, business charge cards also come with rewards programmes, travel insurance and concierge access. Corporate charge cards may include features for tracking company and travel expenses, while also offering a degree of flexibility and control over those expenses.
How to compare charge cards
Make sure you consider the following factors when you compare charge cards so you can find the right option for you.
- Annual/monthly fee. This is an ongoing fee for maintaining your account. If the fee for this type of card is very high, make sure it’s offset by rewards and perks you’ll really benefit from. For instance, if you rarely travel, it probably wouldn’t be worthwhile paying a high annual fee for a charge card offering premium travel advantages like airport lounge access and comprehensive travel insurance.
- Rewards. A card with a good rewards programme and high points earning potential can be a great way for you to profit from your expenses. Rewards programmes vary from card to card, so it’s important to make sure the card you choose allows you to earn and redeem rewards you want, such as gift cards, frequent flyer points and hotel stays. Try to estimate how much you’ll spend on the card each month, to ensure the benefits of the card outweigh the costs.
- Minimum income requirements. The minimum income requirement varies between charge cards, with premium cards requiring a higher annual income than others. Check income requirements for charge cards you’re considering to find one suited to your current income level.
- International transaction fee. This is the fee applied to any international transactions made on your charge card, whether you’re shopping online or overseas.
- Billing period. This will determine when you have to pay off your charge card balance. Make sure you check the terms and conditions for your card so you can spend and budget accordingly.
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 generally at least 18 years old.
- Residency. You’ll need to be a UK resident.
- Annual income. Different cards will require different income levels.
- Credit history. Most charge cards require you to have a high credit rating and no history of bad debt or payment defaults.
What to watch out for
Remember that the full balance on your charge card needs to be repaid and cleared every month, and you won’t have purchase protection under section 75 of the Consumer Credit Act. With an unspecific spending limit, you could easily overspend on a charge card and find yourself unable to repay your balance. This could lead to late fees, additional charges and even impact your credit history.
If you’re looking to borrow over an extended period of time, you may wish to consider a 0% purchase credit card instead.
Frequently asked questions