Is a charge card better than a credit card?

If you use your credit card on a regular basis and religiously pay off the monthly balance in full, it could be worth switching to a charge card.

tbc

Charge cards allow you to pay for goods and services in exactly the same way as you would with a credit card but, unlike credit cards, they have no credit facility so you can never get into debt. What's more, they also come packed with benefits. So is now the time to switch? Weigh up the pros and cons first…

Could a charge card work for me?

If you regularly spend large sums of money on your plastic, a charge card could be well suited to your wallet.

First off, you won't be held back by a spending limit. Because there is no credit facility on a charge card, you can spend as much as you want to – though, of course, you will need to have enough in your bank account to clear the balance every month.

Charge cards are also worth considering if you like the sound of perks such as a concierge service, airport lounge access, and travel insurance, as well as the opportunity to collect reward points to be redeemed on flights or at certain retailers.

Of course, reward credit cards also allow you to collect points which can then be redeemed on flights or days out, but they usually don't come with the more exclusive benefits such as a concierge service or worldwide travel insurance. Charge cards are also often more competitive when it comes to bonus offers which help you to boost your points and reap the rewards more quickly.

What are the drawbacks?

There are some drawbacks though. Charge cards usually come with an annual fee which generally varies between £100 and £450 a year – though that said, credit cards offering the best rewards can also charge a fee. The British Airways Amex Premium Plus Credit Card, for example, charges £150 a year. And bear in mind that if you don't clear your balance on this credit card, you'll be hit with a representative annual percentage rate (APR) of 56.4% (variable).

Like some reward credit cards, charge cards often have minimum income requirements too and you'll need to have a top-notch credit rating.

The biggest drawback is that though is that, unlike credit cards, purchases on a charge card are not covered by Section 75 of the Consumer Credit Act 1974 or the Consumer Credit Directive which, between them, protect purchases between £100 and £60,260 in the event your goods don't turn up or are faulty.

However, you will still have some protection through a scheme called Chargeback. American Express, Visa and MasterCard all have chargeback schemes through which you can claim for a refund within 120 days of discovering a problem with your purchase, so long as the item cost more than £10.

The best options

So if it sounds like a charge card could be up your street, what are the best options? Have a look at these:

Amex Preferred Rewards Gold Card

If you're thinking about applying for a charge card, but you're not comfortable paying an annual fee, the Amex Preferred Rewards Gold Card offers a compromise as it's fee-free for the first year. This gives you time to assess whether you think the usual £125 annual fee is worth paying.

Benefits: Receive 20,000 bonus points when you spend £2,000 on your plastic within the first three months. This is enough for two return flights to Paris or Amsterdam.

Earn one Membership Rewards point per £1 spent on your card, and double points on all petrol and major supermarket purchases for the first 12 months. Double points are also earned on travel purchases and overseas spending.

In addition, you will receive two airport VIP lounge visits each year, travel inconvenience insurance for flight delays and cancellations, and travel accident insurance.

Redeeming your points: You can redeem your points on travel, shopping or experience days. For example, 10,000 points would get you a one-night stay at a Category 4 Starwood hotel or resort OR a £50 Harrods gift voucher OR a Smartbox Unusual Escapes gift box. And 20,000 points would get you a return flight to Istanbul OR a set of Bose headphones OR a £100 Spafinder gift card.

Watch out for: The £125 annual fee which takes effect after a year and the £20,000 annual household salary requirement.

Amex Platinum Card

Benefits: Receive 30,000 Membership Rewards points when you spend £2,000 in your first three months with the Amex Platinum Card - enough to get you two return flights to Barcelona. You will also earn one point for every £1 you spend.

You will have unlimited access to more than 1,000 airport lounges around the world, as well as access to a concierge service to take care of your travel plans, tickets and dinner reservations. And you'll have comprehensive worldwide travel insurance for you and your family.

Redeeming your points: Redeem your points on travel, shopping or experience days. You can also transfer your points to 15 major frequent flyer and hotel programmes, such as those with British Airways, Virgin Atlantic and Starwood Preferred Guest.

Watch out for: The steep £450 annual fee. You must also have an annual household income of at least £40,000.

You can compare a range of charge cards in the MoneySuperMarket comparison tables.

How do these compare to reward credit cards?

A number of credit cards also offer rewards, so how do they compare? We've highlighted some competitive options below:

Credit card

Bonus offer

What you receive

How to redeem points

Annual fee

APR

Lloyds TSB Duo Avios Credit Card Account

15,000 Avios when you spend £500 a month for first three months

Collect 1 Avios point per £1 spent on Amex card and every £5 spent on MasterCard.

Collect double Avios abroad

Redeem points on days out or flights. 9,000 Avios gets you a return flight to Nice, Amsterdam or Berlin

None

17.9%

Lloyds TSB Premier Duo Avios Credit Card Account

20,000 Avios when you spend £500 a month for first three months

Collect 1.25 Avios for every £1 spent on Amex card and every £5 spent on MasterCard.

Collect double Avios abroad.

Companion ticket when you spend £15,000 in a year

Redeem points on days out or flights.

15,000 Avios gets you a return flight to Barcelona, Rome or Venice

£50

23.7%

British Airways Amex Credit Card

Receive 3,000 Avios if you spend £500 in first three months

 

1 Avios for every £1 spent.

Companion voucher when you spend £20,000 in a year

 

Redeem points on flights. 9,000 Avios equals one return flight to Berlin or other European destinations

None

15.9%

British Airways Amex Premium Plus Credit Card

Receive 18,000 Avios if you spend £3,000 in first three months

1.5 Avios for every £1 spent. 3 Avios for every £1 spent with British Airways or BA Holidays.

Companion voucher when you spend £10,000 in a year

Redeem points on flights. 20,000 Avios equals one return flight to Moscow or other destinations in Europe, Asia or Africa

£150

56.4%

NatWest YourPoints World MasterCard

2,500 bonus YourPoints worth £12.50 plus another £2,500 points each year.

Double YourPoints for first 9 months

1 point for every £1 spent.

0% on purchases for 9 months

Use points at retailers such as Amazon or Boots as well as on flights and holidays.

15,000 points gets you a return flight to Barcelona

None

16.9%

Tesco Clubcard Credit Card for purchases

 

5 Clubcard points for every £4 spent in Tesco or at Tesco petrol forecourts.

1 point for every £4 spent elsewhere.

0% on purchases for 18 months

Exchange points for vouchers to save money on holidays, flights and days out.

£2.50 of vouchers gives you 600 Avios

None

16.9%

Bear in mind that with most of these credit cards you'll need to pay off your balance in full each month to avoid paying interest. The exceptions are the NatWest YourPoints World MasterCard and the Tesco Clubcard Credit Card as these both offer several months interest-free on spending – though you must clear your balance before the 0% shelter ends.

You can compare a range of rewards credit cards in our tables.

Which option is right for me?

Ultimately, whether a charge card or credit card is the best bet for you will depend on your circumstances. But to help you make the decision, ask yourself the following questions:

  • Can I afford to clear my balance every single month?
  • Am I happy to pay a fee for my card?
  • Will the card's benefits outweigh the cost of the fee for me?
  • Will I use perks such as a concierge service and access to airport lounges?
  • Which card offers benefits more tailored to my requirements?

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct

Did you enjoy that? Why not share this article

SAVE MONEY NOW

Other articles you might like

Popular guides