How does a charge card work?
A charge card works a lot like a credit card. You can use it for day-to-day purchases or bigger expenses, but the key difference comes at the end of the month.
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You must repay your full balance each month – there’s no option to carry it over.
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No interest is charged – but only if you pay in full and on time.
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You could face large penalty fees if you miss a payment.
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No pre-set spending limit – but your transactions are still approved based on your spending habits and payment history.
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Annual fees are common, especially for cards that offer extra perks or rewards.
How does a credit card work?
Credit cards offer more flexibility:
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You can choose how much to repay each month, as long as you make the minimum payment.
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Interest is charged if you don’t repay in full, unless you're on a 0% promotional deal.
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There is usually a set credit limit based on your financial situation.
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You can use a credit card for spending, balance transfers, or cash withdrawals (though the last often comes with higher interest).
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Some cards offer Section 75 protection which covers eligible purchases between £100 and £30,000.
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Charge card vs credit card: side-by-side comparison
|
Feature |
Charge card |
Credit card |
|
Repayment |
Full balance must be repaid every month |
Minimum monthly payment required; can carry a balance |
|
Interest |
No interest if paid on time |
Interest charged on carried balance |
|
Fees |
Often has an annual fee |
May have no annual fee (depending on card) |
|
Spending limit |
Usually no set limit |
Fixed credit limit |
|
Eligibility |
Suited to high earners with good credit |
Available to a wider range of credit scores |
|
Credit impact |
Can build credit if paid on time in full |
|
|
Missed payments |
Penalty fees apply; risk of card cancellation |
Late fees apply; interest added and may affect your credit score |
|
Rewards |
Often comes with perks e.g. travel rewards |
Many cards offer cashback, points, or other benefits |
|
Protection |
Not covered by Section 75, but may offer chargeback |
Covered by Section 75 if used for eligible purchases |
|
Acceptance |
Less widely accepted than credit cards |
Widely accepted in the UK and abroad |
Which one is better for you?
It depends on your circumstances and how you manage your money:
A charge card could be better if:
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You have a good income and always pay off your balance in full.
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You want premium perks like travel rewards.
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You don’t need a fixed spending limit.
A credit card could be better if:
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You want more flexibility in how and when you repay.
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You need to spread the cost of purchases over time.
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You want Section 75 protection on eligible purchases.
Choosing between a charge card and a credit card
While charge cards can offer flexibility and perks, they’re not as widely available or accepted as credit cards, and you must be confident you can repay your balance in full each month. Credit cards, on the other hand, give you more repayment options and protection – but come with the risk of interest if you carry a balance.
Before choosing either, it’s important to think about your spending habits, income, and how you plan to use the card.
Disclaimer: We make every effort to ensure content is correct when published. Information on this website doesn't constitute financial advice, and we aren't responsible for the content of any external sites.
Fiona Peake
Personal Finance Writer
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
