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What is a charge card?

Charge cards and credit cards are quite similar. With both, you spend upfront and pay it back later. The main difference is that with a charge card, you must pay off the balance in full every month. People often opt for charge cards as they can come with perks – things like airport lounge access or free travel insurance.

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How you use a charge card 

You can use a charge card in the same way you use a credit card. You make purchases using the card, and then pay it off at the end of the month. However, with a charge card you must pay off the balance in full each month - there’s no minimum payment option. 

The good thing is that you won’t pay interest when you shop with a charge card. However, if you pay off your credit card in full each month, you also won’t pay interest on this either. 

Another thing to know about charge cards is that they don’t usually have a spending limit. This can be considered a good or a bad thing. If you take out a charge card, you shouldn’t spend more than you can afford, as you’ll have to repay it all in one go. You’ll be charged a heavy penalty fee if you can’t repay the balance.  

You should also be aware that charge cards often come with an annual fee. This varies from lender to lender, so make sure you check this before you take one out.  

Charge card vs credit card 

 

Charge card 

Credit card 

How much does it cost? 

You’ll pay no interest on purchases if you pay the balance off in full and on time.

But it’s likely there’ll be an annual fee attached.  

If you don’t pay your balance on time and make at least the minimum repayment, then you’ll be charged interest.

This varies from lender to lender. If you make your repayments correctly, you shouldn’t have to pay any interest.  

What can I use it for? 

Spending only. 

You use this card for spending, and possibly transferring all your debts into one place as well (depending on the type of credit card you get). 

Can I get one? 

Because you must pay off your balance in full each month, these types of cards are aimed at those with a higher income and good credit history.  

There are credit cards designed for people in a variety of circumstances.  

Whether you can get a credit card will depend on your eligibility - factors like your credit history and your affordability. 

How does it affect my credit score? 

You can build your credit score by showing you can repay what you’ve borrowed in full every month.  

You can build your score - but only if you make your repayments on time, and pay the minimum repayment and stay within your limit.

What if I miss a payment?

You must repay the balance in full each month.

If you miss a payment, you’ll be charged interest and a late fee. This will also show up on your credit report. 

If you continue to miss payments, your card could be cancelled.

You need to pay at least the minimum amount each month to avoid late fees.

If you pay the minimum, you’ll have to pay interest, but no late fees will apply.

If you completely miss a payment, make a late payment, or pay less than the minimum amount, it will show up on your credit report and you could potentially lose any special deals on your card (such as a 0% introductory offer, for example). 

Are there any extra rewards? 

Depending on the lender, there could be extra perks that come with your charge card.  

Depending on the lender, there could be extra perks that come with your credit card. 

Is it protected? 

Charge cards are not protected by Section 75 of the Consumer Credit Act. However, they may offer their own protection called a ‘chargeback’. 

 

Credit cards could be protected by Section 75 of the Consumer Credit Act. This means your lender is held liable for purchases made from £100 to £30,000. 

 

Where can I use it? 

Charge cards are not as widely accepted as credit cards so you’ll need to have a debit card or cash just in case.  

Credit cards are widely accepted by most retailers.