Charge cards

Charge cards are often mistaken for credit cards, but there are some differences in how you can use them. Find out more about their perks and perils...

Key points

  • Charge cards work in a similar way to credit cards, but you have to repay the balance in full each month
  • There’s often an annual fee, but you may expect loyalty points and perks
  • Charge cards are usually aimed at businesspeople or high earners
  • Not all retailers accept them

In essence, charge cards work in a similar way to credit cards - they allow you to buy something now and pay for it later.

The big difference is that you have to pay off a charge card in full each month and they're generally used by high earners, or for putting expenses on a company account.

How do charge cards work?

Charge cards are designed to be paid off in full each month; if this is done, there’s never any interest to pay.

Often charge cards have no spending limit, so they’re ideal for very large purchases. Some cards will set a spending limit, though, and they’ll base this on your previous spending habits and credit history.

Some cards will charge an annual fee for their use, although often they’ll also operate a cashback or rewards scheme offering you plenty of perks.How to make your credit card work harder for you

The best-known charge card operator is American Express, but many other financial service providers also offer charge card accounts.

If you search for credit cards through Gocompare.com you'll see any charge cards we can offer alongside regular credit cards in our comparison table.

Who are charge cards for?

Charge cards for businesses

Small businesses may find that using a charge card is helpful for their cash flow, as they can pay for all spending in one go at the end of the month.

Charge cards are often used by larger businesses to allow their employees to buy goods and services, then pay for them at a later date.

It’s sometimes possible to have a number of cardholders on a business charge card account, so several employees can each be given their own charge card on a single business account.

Charge cards for individuals

Individuals can also apply for certain charge cards, but they may find they don’t spend enough or make use of the perks to the extent that the card will pay for itself.

How do charge cards differ from credit cards?

  • Often have no credit limit
  • Must be paid off in full each month
  • Usually have an annual fee

There’s often a minimum income to be eligible for cards as well - they’re typically aimed at high earners.

People who travel and rack up lots of expenses for work may find them very useful.

They can put all their business expenses on the card before repaying it in full once their expenses have been repaid by their employer, and they can earn some handy perks along the way.

If you won’t use the perks, don’t want to pay an annual fee and can’t pay back the full amount every month, a credit card will probably be more appropriate for you than a charge card.

Charge card perks

Although some cards are very basic, many offer an impressive list of perks that’ll help offset any annual fee.

Reward points schemes, concierge services, travel insurance, breakdown cover and airport lounge access are all common offerings.

Cashback credit cardsJust as with packaged bank accounts, you should make sure you’ll get your money’s worth from the perks when you take the annual card fee into account.

If you’re hoping to take advantage of insurance offers with a charge card, check you’re not doubling up on cover you have with other products and make sure you’re not excluded by the terms and conditions - being above an age limit for travel insurance, for example.

Charge card fees

Charge cards usually levy a fee and the sums can be significant - around £100 a year could be typical.

As well as this, if you fail to clear your balance each month you could incur some hefty penalty fees and face having your card cancelled.

Charge card spending limits

One of the chief attractions of charge cards, particularly for businesses, is that they often have no spending limit.

This means they can be useful for working like a business account - putting all work spending onto the card and paying it back at the end of the month.

Some charge cards, especially those designed for individuals, will have spending limits, though, so if you want to avoid fees it’s important to know what the limit is on your card before you spend.

Other drawbacks to charge cards

One of the main drawbacks of charge cards is that they’re not accepted as widely as credit cards.

This is because some charge card companies charge higher processing fees than Visa and Mastercard, so small businesses accepting card payments might well exclude charge cards to help them keep costs down.

Because of this, it’s probably best not to rely on being able to use one and to keep a debit or credit card in your wallet as well, just in case.

Make a soft search for charge cards

If you're looking for a credit card, it's worth starting your hunt with a comparison service that uses a smart search tool.

At Gocompare.com, our credit card comparision service includes a smart search tool.

This will conduct a so-called soft search for cards, which won't have any impact on your credit history. Such a search will show you the cards you're likely to qualify for before you go ahead with a formal application.

By Derri Dunn