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Charge cards

Written by Jafar Hassan, Content editor

19 December 2018

Primarily aimed at high income earners, charge cards are similar to credit cards but with added perks and strict repayment plans

Charge cards close up

They are primarily aimed at high income earners and for businesses charging the company account.

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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?

In short they 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, 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.

Business credit cards and premium credit cards are often charge cards, and one of the best known providers of charge cards in the UK is American Express.

What are the advantages of charge cards?

One advantage 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 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 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.

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