A guide to charge cards

If you've decided to apply for a credit card, one of the first things you may have done is shop around for the best deals on the market, and seek out the cards that most suit your needs. This search may have resulted in you coming across something new – the charge card.

But what is a charge card, and how does it compare to a credit card? Read on as we explain.

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What is a charge card?

A charge card is an alternative to a credit card. If you want greater freedom with your spending, a charge card can provide this because, unlike with a credit card, there is no spending limit, so you can spend as much as you want. However, in return you must pay off the balance in full by the date agreed with your card provider, as there’s no option to spread the payments over several months, as you would with a credit card.

Because you have to pay your charge card off in full every month, there’s no interest rate attached to it, which can make your spending cheaper than with a credit card. However, many charge cards come with an annual fee attached, so take this into account when considering whether it’s the right option for you.

Simply put, whether you decide to take out a credit card or a charge card will come down to your own spending preferences. If you like to clear your balance in full when your bill arrives and are comfortably able to do so, a charge card could be perfect for you. However, if you prefer to have the option of paying back your borrowing in regular instalments you know you can afford, a credit card is probably a safer bet.

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Charge cards versus credit cards: how do they stack up?

How much does it cost?

Charge Card

You pay back what you have spent each month and no more. There may, however, be an annual fee.

Credit Card

Just like a credit card is not a free meal ticket, it’s also not your money you’re spending – and it’s important not to forget this.

When you buy something using your credit card, you’re in debt to your lender for that sum. Try to clear the balance as soon as you can so you can get out of the red, and never spend more than you can afford to repay.

What can I use it for?

Charge Card

Spending only.

Credit Card

As well as spending you can also transfer existing card balances on to one credit card to consolidate them, so that you’re making one repayment a month rather than several.

Do I qualify?

Charge Card

Because you have to pay off your charge card balance in full every month, usually only applicants with a relatively large income are accepted.

Credit Card

There are lots of different types of credit cards available, to suit different peoples needs. Whether you’ll be accepted or not, and what spending limit and interest rate you’ll be given, depends on your specific circumstances and credit score.

What's the impact on my credit score?

Charge Card

A charge card can help you to build your credit score, as it shows you’re able to borrow money and repay it all every month.

Credit Card

A credit card can also help improve your credit score, but this only works effectively if you pay off, at least, the minimum amount each month.

What if I miss a payment?

Charge Card

If you fail to pay off your charge card balance, you could be charged a fee for every month you miss a payment. You may also have to pay a penalty interest rate and, combined, this can be more expensive than the equivalent penalty on a credit card. This can harm your credit rating.

Credit Card

If you don’t pay off your balance in full, you will have to pay the interest rate agreed with your lender. If you pay back less than the minimum repayment, you could also be charged a penalty and you may lose any special interest rates or rewards you were previously enjoying. This also harms your credit rating.

Are there any extra rewards?

Charge Card

Depending on the card you go for, you can expect perks that range from discounts to concierge services.

Credit Card

Again, depending on the card you apply for there may be rewards to enjoy. Popular options include cashback, loyalty points and air miles.

Am I protected?

Charge Card

Unlike credit cards, charge cards are not protected under Section 75 of the Consumer Credit Act. However, many charge cards come with their own protection, known as chargeback.

Credit Card

Yes – under Section 75 if an item you have purchased for over £100 is faulty, damaged, missing, does not arrive or if the vendor goes bust, your lender is liable to provide you with a refund.

Where is it accepted?

Charge Card

Charge cards are not as widely accepted as credit cards, so you may find you still need to carry around an alternative – like a debit card or cash. And, unlike credit cards, balances from other cards cannot be transferred onto a charge card.

Credit Card

Credit cards are widely accepted.

Whether you choose to apply for a charge card or a credit card will ultimately come down to your own needs and circumstances. However, we hope we've made the differences between them – and therefore your choice – a little clearer.

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Know if you're accepted before you apply with QuickCheck

  • Get credit - up to £1,500
  • QuickCheck won’t affect your credit rating
  • Get a fast response in 60 seconds
Check Now 34.9% APR Representative (variable)
Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender

Know if you're accepted before you apply with QuickCheck

  • Get credit - up to £1,500
  • QuickCheck won’t affect your credit rating
  • Get a fast response in 60 seconds
Check Now 34.9% APR Representative (variable)
Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender