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Charge Cards

What is a charge card?

A charge card is a plastic card that can be used to pay for goods and services. It looks like a credit card – but it works in a different way. Our guide explains all you need to know about charge cards, who they suit, the costs, plus the pros and cons - comparing them to other types of borrowing.

By Mehdi Punjwani

Published: 21 May 2019

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How are charge cards different from credit cards?

Credit cards work differently to charge cards – with a credit card you have the option to either pay the balance off in full at the end of the month or carry some of the balance over into the next month without a penalty fee or charge.

Interest is charged on credit card borrowing, but at more reasonable rates than on most charge cards. For this reason, many borrowers may find a credit card is more suitable.

Any balance you build up on a charge card must be repaid in full each month. Borrowers who fail to clear the balance at the end of the month can face big penalty fees and high interest charges.

In contrast to charge cards, you can borrow money on a credit card and, as long as you make a minimum repayment each month, you can hold the balance on the card for a much longer period of time – sometimes known as revolving credit - typically paying a lower interest rate.

Who are charge cards suitable for?

Charge cards can offer a convenient and secure way to pay for expensive items or services – meaning you don’t have to carry large amounts of cash around.

They don’t offer a revolving credit facility – your monthly balance must be repaid in full – so cardholders shouldn’t get into long-term or persistent debt as can happen with credit card borrowing.

Lots of charge cards offer perks and reward schemes, such as discounted car breakdown insurance, travel cover or the use of concierge services and airport lounges, for example. They can suit people who want these extra perks.

But reward charge cards often charge an annual fee which can be several hundred pounds per year, so be sure to read the terms and conditions. If you don’t want the perks you can usually get a charge card with no rewards which won’t charge an annual fee.

What is the limit on a charge card?

Most charge cards have either a very high spending limit or offer unlimited spending, allowing you to make large transactions without concerns that your card will cover the payment.

This is different to credit cards which set a credit limit for cardholders, based on their income and credit score.

Are charge cards easy to get?

Many businesses use charge cards as a convenient way to enable their employees to pay for their work expenses. Personal charge cards are more difficult to get. You typically need a high income and an excellent credit score to be eligible.

Who offers charge cards?

A few banks and credit card providers offer charge cards but the UK market is small. Often you will need to be an existing bank or card customer to be eligible for a charge card.

Will having a charge card improve my credit rating?

Paying your charge card balance off in full each month can help to improve your credit score, just as missing a payment could damage your score.

Using a charge card instead of a credit card for expensive purchases could also be better for your credit score. This is because if you are close to your credit limit on a credit card this can bring your credit score down. By using the charge card you repay the balance in full and you have not affected the credit limit on your credit card.

What are the main drawbacks with charge cards?

Charge cards tend to have very high or no spending limits so this could end up being a problem if the cardholder overspends and then cannot pay off the balance at the end of the month. You will need to exert some discipline with your spending if you hold a charge card, as if you miss the repayment date you will likely face very high charges.

Another big drawback of charge cards 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.

What are the pros and cons of charge cards?

Alternative ways to borrow

It may be that a charge card is not suitable for the way you want to spend and borrow, or you may not be eligible for a charge card.

Credit cards can offer a convenient and flexible way to pay for goods and services – and they offer section 75 protection, but there are pros and cons so it is important to think about whether they suit your needs.

There are different types of credit card – from cards offering zero per cent interest on your balance over a long period enabling you to cut your debts, to rewards and cashback cards that give a kickback when you spend. With MoneySuperMarket you can compare a wide range of card deals and find out which cards you might be eligible for without affecting your credit score.

Personal loans offer a low cost way to borrow over the short or medium term, typically three or five years for example, with monthly repayments fixed from the outset. They may provide a way to consolidate more expensive debts [TR8] in one place at a lower cost. There are different types of loan available and each have pros and cons.

Smaller sized loans tend to be more expensive in terms of the interest rate you will be charged but they may suit some borrowers who want to avoid the revolving credit offered on a credit card.

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MoneySuperMarket does not compare charge cards however we can help you compare between a wide range of credit cards and loans to suit your needs.

Our eligibility checker does a soft search without harming your credit score so you can see which cards and loans you’re eligible for and your chances of being accepted. This way you know where you stand before you apply.

MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.

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