Charge card vs credit card: what's the difference?
Written by
Emily Tye
Reviewed by
Amy LancashireA charge card is a card you have to pay off in full every month. A credit card gives you a choice: clear the whole balance, or pay part of it and borrow the rest, with interest charged on whatever's left. In the UK there's one more difference that's easy to miss. Purchases on a charge card aren't covered by Section 75 of the Consumer Credit Act.
What is a charge card?
At the till, a charge card works like any other card. You pay with it, your card provider covers the cost and you get a monthly statement. The difference comes when the statement arrives. It asks for the full balance, and you have to pay all of it by the due date. There's no minimum payment and no option to carry anything over to next month.
Because you can't borrow beyond the month, you won't normally pay interest on purchases as long as you pay in full and on time. Charge cards tend to come with a card fee instead, usually charged annually or monthly. Credit cards can have fees too, which we cover in our guide to credit card fees.
Some charge cards have no pre-set spending limit, but that doesn't mean there's no limit at all. Instead of giving you a fixed number, the provider decides whether to approve each payment as you make it, based on how you use the card. It can also set a limit at any time. Other charge cards, including some business cards from high street banks, have a set credit limit, just like a credit card.
Charge card vs credit card at a glance
| Charge card | Credit card |
|---|---|---|
Monthly repayment | The full balance, every month | At least the minimum payment |
Interest | None on purchases if you pay in full and on time | Charged on any balance you don't clear. None on purchases if you clear your full balance on time |
Spending limit | Some have no pre-set limit, others have a set limit | A set credit limit |
Section 75 protection | Not covered | Covered for items costing more than £100 and up to £30,000 |
This is a general comparison, and terms vary from card to card.
Are charge cards covered by Section 75?
No. Section 75 makes a credit card provider jointly responsible with the retailer if something goes wrong with an item costing more than £100 and up to £30,000, for example if the goods never arrive or turn out to be faulty.
But the Consumer Credit Act 1974 excludes card agreements that require you to repay everything you've spent in a single payment for each billing period, where that period is 3 months or less. That's exactly how a charge card works, so Section 75 doesn't apply to charge card purchases.
If something goes wrong with a charge card purchase, you may still be able to ask your provider to reverse the payment through a chargeback. This is a process set by card schemes such as Visa, Mastercard and American Express rather than a legal right, so a refund isn't guaranteed and there are time limits for asking.
What happens if I don't pay my charge card in full?
With a charge card, there's no smaller amount you can pay to keep the account up to date. If you pay less than the full balance, the payment counts as late. Depending on the provider, you could:
pay a late payment fee
be charged interest on the amount you owe
have your card suspended or cancelled
have the late payment recorded on your credit file
A missed payment can stay on your credit file for 6 years. Read more about how long missed payments stay on your credit report.
A credit card works differently. As long as you make at least the minimum payment, you won't be charged a late fee. You'll pay interest on the rest, but the account stays up to date.
If you're worried about paying a charge card balance, contact your provider as early as you can.
Can I still get a charge card in the UK?
Yes, but personal charge cards are now hard to find. Some well-known ones have been switched to credit cards in recent years.
Most of the charge cards still on offer in the UK are business cards. Some of these now let you spread part of the balance over time, with interest, which blurs the line between the two even further.
Not sure which type you have? Check your statement. A charge card statement asks for the full balance, while a credit card statement also shows a minimum payment.
Should I get a charge card or a credit card?
A charge card may suit you if:
you always pay your balance in full and want a card that won't let you borrow beyond the month
you're paying business expenses and want one bill to clear each month
the card's benefits are worth more to you than its fee
A credit card may suit you better if:
you'd like the option to spread a cost when you need to
you want Section 75 protection on bigger purchases
you'd rather avoid an annual fee, which many credit cards don't charge
If you like the idea of clearing your balance every month, you can do that with a credit card too. If you set up an automatic payment for the full statement balance each month, it's paid off automatically. That way you don’t pay interest on purchases, you're less likely to miss a payment, and you keep your Section 75 protection.
FAQs
There are a range of financial products available that may suit your needs. We encourage you to research your options carefully and consider seeking independent financial advice before making any decisions. This blog is for informational purposes only and does not constitute financial advice.
