Charge cards

Charge cards vs credit cards: what’s the difference?

Let’s break down the differences between charge cards and credit cards so you can easily compare the two.

Repayments

• Charge cards: you repay the balance in full at the end of the agreed period –this is typically at the end of each month, but it could be longer
• Credit cards: you can carry over your balance, but you must make at least the minimum repayment each month. This is normally worked out as a percentage of your outstanding balance. 

Interest rates

• Charge cards: You won’t pay any interest on what you borrow, but penalty fees and charges will apply for late or missed payments
• Credit cards: You’ll pay an agreed amount of interest on any outstanding balance on your card each month, unless you’re within the promotional period of a 0% credit card (with some conditions).  

Fees

• Charge cards: Many charge cards charge an annual fee, although the amount can vary significantly between lenders
• Credit cards: Many credit cards don’t charge an annual fee – those that do typically come with rewards, as charge cards do. 

Availability

• Charge cards: Not commonly available in the UK – although a few lenders offer charge cards for personal use, they are most aimed at business owners
• Credit cards: Credit cards are widely available in the UK, with all the main high-street banks and even some supermarkets, offering credit cards to eligible customers. 

Purchase protection

• Charge cards: Not covered by Section 75 of the Consumer Credit Act, although charge card customers may be able to claim under the Chargeback scheme
• Credit cards: Purchases made by credit card could be protected under Section 75 of the Consumer Credit Act but terms do apply. 

How much do charge cards cost?

Although you won’t pay interest on your balance with a charge card, fees do apply. Depending on the card, these could include:

Annual fees
Business charge cards typically charge an annual fee, although this fee can vary significantly depending on the card, from less than £50 all the way up to £650.  In some cases, the annual fee may be waived if you spend a certain amount on your card each year. 

The most basic charge cards, designed for personal use, may not come with any annual fees, but they’re unlikely to offer any rewards either.  

Withdrawal fees
You’ll typically be charged a fee when you use your charge card to withdraw cash at an ATM. This is often worked out as a percentage of the amount you’re withdrawing, although a minimum transaction fee (often up to £3) may apply. 

Fees for use abroad
Charge cards will often charge a non-sterling transaction fee if you spend on your card while abroad. This is typically just under 3%. You’ll also pay a cash fee on top of that if you withdraw cash at a foreign ATM. 

Before you take out a charge card – or a credit card for that matter – make sure you read the terms carefully to check what fees and charges could apply to different transactions. That way, you’ll avoid any nasty surprises. 

Are there any penalties for late payments with charge cards?

You could be charged a penalty fee if you miss a payment, go over your agreed credit limit or you’re late paying off the balance on your charge card account. This is often a set amount – typically around £12 – but check the terms of your card to be sure. 

You could incur further charges if you fail to repay your balance in full and the lender starts collection proceedings against you.

Who are charge cards for?

In the UK, charge cards are primarily aimed at business owners. Business charge cards can be useful for managing cash flow and business expenses, especially in organisations with multiple employees. 

Most business charge accounts allow members to issue several cards. That means business owners can give their employees a card to use for work-related expenses. 

Charge cards could also help businesses with lots of monthly expenses reap rewards for the payments they make to suppliers – and get a little extra time to pay the bill.   

How can I get a charge card?

To qualify for a charge card, you’ll need to meet certain eligibility requirements. This varies among lenders but as a minimum they’ll typically ask for the following: 

• You’re over 18 – if you’re applying for a business charge card, both the director and employees may need to fulfil this condition
• You or your business have a permanent address in the UK
• You have a UK current account, or a UK business current account
• You’re not bankrupt or in bankruptcy proceedings.

You also need to meet your lender’s affordability requirements. If you’re a business owner, this may mean having a turnover over a certain amount. And because lenders are extending a potentially large, and in some cases unlimited, amount of credit to you (albeit in the short term) you’ll likely need a good credit record to be considered.

To find the best charge card for you, it’s a good idea to shop around and compare your options. Carefully consider if it’s the right choice for your spending and, if so, think about what rewards will have the most impact on you or your business.   

What rewards cards can I get if I don’t qualify for a charge card?

There are rewards credit cards that could reward you for your spending too. 

Unlike charge cards, rewards credit cards allow you to carry over an outstanding balance. But you’ll be charged interest each month on what you owe, and this could impact any potential rewards. 

Cashback credit cards reward you with money back on your purchases. They give you a way to earn a little back on your everyday spending. But they only really make sense if you’re able to pay them back each month in full.  

To qualify for these types of credit cards, you’ll also need to pass a lender’s credit and affordability checks. If you have a poor credit record, you could consider looking at credit builder cards instead. 

You can use our credit card eligibility checker to see what cards you could be accepted for, from a range of providers. And it won’t affect your credit score. 

Compare the Market Limited acts as a credit broker, not a lender. To apply you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility.