Primarily aimed at high income earners, charge cards are similar to credit cards but with added perks and strict repayment plans
American Express is one of the best known providers of charge cards in the UK, but some banks also issue them.
They are primarily aimed at high income earners and for businesses charging the company account.
They don’t charge any interest but you do have to pay off the balance in full at the end of the month and an annual fee.
They work in a similar fashion to credit cards but there are still some things worth knowing first.
What is a charge card?
Charge cards are much like credit cards – they allow you to pay for goods and services on credit, but with a charge card you must pay off your balance in full at the end of the month.
Although you don’t pay interest on any money you borrow with a charge card, you will have to pay an annual fee for the card.
This means that you technically only borrow the money for a short period, whereas on a normal credit card you are usually allowed to borrow for as long as you can keep up with the minimum monthly repayments plus any interest you owe.
What are the advantages of charge cards?
One advantage of charge cards is that they often have no spending limit, making them very convenient if you are a high spender or ever have to make expensive purchases on your credit card.
Many charge cards also come with discount or reward schemes and other perks, like concierge services, travel insurance, breakdown cover or even access to exclusive airport lounges.
Depending on how much you use your charge card and the kind of rewards and extras included, you could find that they end up being worth the same as or even more than the card fee.
Charge cards can be good if you know you have the money to cover your purchase but just want to collect the benefits or hold onto your savings until payday
You may want to spend big a few days before you get paid or put it on the charge credit card purely for the sake of getting the card’s benefits that often reward you more as you spend more.
What are the disadvantages of charge cards?
A disadvantage to charge cards in the UK is that they are not suitable for borrowing over a longer period than a month, because your balance must be paid in full at the end of each month.
If you don’t pay your charge card balance in full, you will have to pay late payment charges, and this could damage your credit score.
Charges cards are often subject to stricter acceptance criteria than other credit cards – for example there may be a high minimum salary requirement and you will probably have to have a very good credit rating to get one.
You could also get some decent benefits with credit cards that allow you to borrow over a longer period. Some credit cards offer cashback on your spending, but the APR is usually higher than average to discourage you from borrowing on it for longer periods.
Nonetheless, these could be a better option if you do not have enough disposable income to pay off your balance in full every single month. Most credit cards will also have a smaller annual fee compared with a charge card.
The American Express Platinum charge card
The American Express Platinum charge card has an annual charge of £450 – which might seem high, but the card comes with some very appealing added extras that could be worth the fee, depending on your interests and lifestyle.
You get access to a concierge service which you can use for everything from booking flights, tickets, hotels, restaurants and holidays to arranging conference facilities and even buying and delivering gifts for you.
You also get access to exclusive airport lounges and upgrades, comprehensive travel insurance for you and your family and a rewards scheme which means you can earn points on all your spending.
If you wanted to use the card purely on large purchases so you could collect points, then the card could work for you.
However, if you try spending it on things you don’t have the money for, then think again, as you won’t be allowed to pay it off on a ‘minimum monthly repayment’ plan. You have to pay off the balance in full at the end of each month.
American Express Gold charge card
The American Express Gold charge card has an annual charge of £125 (free in your first year) and is great for travel benefits.
With the Membership Rewards scheme you earn one point for almost every pound you spend, and double points on your travel spend.
As a first year bonus, you also earn double Membership Rewards points on your supermarket shopping and petrol.
You can redeem your points with companies including British Airways, Hertz, Hilton, Radisson and Virgin Atlantic.
You also get Travel Inconvenience Benefit, Travel Accident Benefit, access to exclusive upgrades and a dedicated travel team who can help you plan, arrange and book your trip.
A charge card may not be for you if you have no need for these benefits but it’s worth looking beyond the high annual fees to see what you really get for your money.
If you want the benefits but do not think that a charge card is right for you, then have a look at cashback, rewards and airline credit cards to see what they offer.
The annual fees are likely to be lower, and although the benefits are not as large, could still be worthwhile.