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A guide to charge cards

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What is a charge card? 

A charge card is a plastic card that looks very much like a credit card, and which can be used to pay for goods and services in just the way you’d expect from a credit card. 

How are charge cards different from credit cards? 

Unlike with credit cards, however, any balance you might build up on a charge card will need to be repaid in full at the end of every month. 

In other words, it isn’t possible to borrow money using a charge card, whereas credit cards can be used to spread the cost of items over a longer period of time.

What are the pros and cons of using a charge card? 

Charge cards offer the flexibility of paying with plastic without the worry that you might get into debt. That said, if you opt for a charge card without a pre-set spending limit, it’s important to ensure you do not spend more in a month than you can afford to repay.

Charge cards tend to come with annual fees, although some providers will waive the fee for your first year as a cardholder. While you may receive certain perks when you show your charge card - for instance, you might be able to access concierge services, or special lounges at some airports - it’s up to you to decide whether these are worth the yearly price you’ll eventually have to pay for your card.

If you’re a business owner, you might find that giving staff members charge cards for their expenses makes sense; you’ll be able to track exactly what they have spent and when, and will have no fear of debts or interest charges building up. 

Whichever charge card you choose, certain conditions will apply to your application. For example, you are likely to have to prove you have a minimum income (perhaps £20,000 a year) before you’ll be accepted for a charge card - so look into what terms might affect your eligibility for a charge card before applying in order to avoid disappointment.  

Whatever your particular reason for choosing a charge card over a credit card, one final thing to re-member is that, unlike with a credit card, you won’t be entitled to reclaim money you have spent on goods or services in the event that they are unsatisfactory, not as described or do not last for a rea-sonable period of time.

Under Section 75 of the Consumer Credit Act, credit card purchases do benefit from this safety net - meaning that if you buy something and find the retailer you originally purchased the item from unhelpful or even insolvent, you can claim back what you spent from your credit card provider. 

How can I find the best charge card for me? 

As with any financial product, comparing a selection of deals is the key to finding the right charge card for you. 

MoneySuperMarket’s charge card comparison channel is a good place to start looking at different deals.

If you’re a business owner, you might find that giving staff members charge cards for their expenses makes sense

Pros and cons of charge cards

While using a charge card can be a very convenient way to pay, users must be certain that they can always afford to pay off what they owe at the end of the month. If they can’t, there may be steep fees to pay, or the card may be cancelled altogether. 

Charge cards can be particularly useful for business use, as companies have a record of all spending across cards issued to staff, and can clear the balance in full every month.

A drawback of charge cards, however, is that they don’t offer any protection if something goes wrong with the goods or services you buy using them. Purchases costing between £100 up to £30,000 made with a credit card are protected under section 75 of the Consumer Credit Act (topped up to £60,260 with the more recently-introduced Consumer Credit Directive) which means the card issuer is jointly liable if something goes wrong – but charge cards don’t offer this protection.

Choosing a charge card

When deciding which charge card is right for you, there are several things you need to consider. First, think about the sort of annual fee you are prepared to pay, and what sort of benefits you would like your card to come with. If, for example, you are a regular traveller, you may want to look specifically for a card which comes with travel-related perks, such as access to airport lounges. 

You can compare the various charge cards on offer, and the different benefits they provide, on MoneySupermarket. 

Where to next?

What is a good credit score?

How long will it take to apply for a credit card?

Advantages and disadvantages of credit cards

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