Charge card comparison
How a charge card works, how it stacks up to a traditional credit card and how to compare your options to find the right one.
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Charge cards work in a similar way to credit cards, with the bank paying for the purchases you make and then sending you the bill at the end of the month. But there are some key differences between a charge card and a credit card - primarily that a charge card doesn't charge interest. Here's how to compare your options and how to decide if a charge card is right for you or your business.
What is a charge card?
Charge cards have no set spending limit and require that you pay your full balance off by the statement due date. A charge card is not a revolving line of credit and doesn't charge interest like traditional credit cards. Instead, you will be charged a late fee if you don't pay on time. The structure and payment requirements of charge cards also means that they tend to have higher minimum income and credit history requirements than some credit cards. Charge cards often come with benefits like rewards points, travel insurance, airport lounge access, concierge services and purchase and fraud protection.
What types of charge cards are there?
Rewards charge cards
Some cards are linked with a rewards program and can earn points per $1 spent on eligible transactions. Depending on the card, you can redeem these points for rewards including flights, travel packages, gift cards and more. These cards sometimes offer other travel perks including travel vouchers, airport lounge passes and perks with partnered hotels. Frequent flyer and rewards charge cards typically charge higher annual fees than other options.
Gold and platinum charge cards
Gold and platinum charge cards are designed to suit big spenders who are looking for premium perks. Depending on the card, you could get luxury rewards including fine dining, five-star hotels and travel benefits. You can spend with peace of mind and convenience thanks to complimentary insurance covers and platinum concierge services. These cards usually charge higher fees and are best suited to high-income earners.
Business and corporate charge cards
You can use these charge cards to cover business costs, improve cash flow and manage employee spending. The right type of charge card will depend on the type of business you own. Business charge cards cater to small businesses whereas corporate charge cards are better suited to larger corporations. Similar to personal cards, some business charge cards also come with rewards programs, travel insurance and concierge access. Corporate charge cards may also offer features for tracking company and travel expenses, while also larger credit limits and more additional cardholders.
How to compare charge cards
Make sure you consider the following factors when you compare charge cards so that you can find the right option for you.
- Annual fee. Charge cards typically charge higher annual fees than credit cards. As these cards usually come with competitive rewards programs and extra features, make sure that you're taking advantage of these perks.
- Minimum income. Charge cards usually have higher minimum income requirements than some other credit cards. For example, you may need to earn at least $75,000 or $100,000 per year to apply for some of these cards.
- Billing period. This will determine when you have to pay off your charge card balance. Usually you will receive a statement once a month, but some cards may offer more than 30 days between payments.
Charge cards vs credit cards
Considering factors like card balance, interest rates and fees, you can compare credit cards and charge cards side-by-side below.
| Feature | Charge cards | Credit cards |
|---|---|---|
| Card balance | Card balance must be paid in full each month. | Card balance can be carried indefinitely as long as 2-3% monthly minimum repayment is made. However, interest will be charged to any unpaid balance. |
| Interest rate | No interest rate but a late fee penalty applies if the balance is not paid in full. | Interest fees apply for purchases and cash advances. |
| Credit limit | No pre-set credit limit. | Fixed credit limit. |
| Card fees | Annual fees and late payments apply. Cash advance, ATM and international transaction fees may also apply. | Annual fees are sometimes waived, but other fees such as ATM, cash advance and international transaction charges may apply. |
| Eligibility requirements | High minimum income requirements. | Varying income depending on the type of card. |
| Credit/ loan facility | Charge cards are suitable for spending in the short-term but are not loan facilities. | Credit cards support loan consolidation and allow you to spread repayments over an extended period. |
How to apply for a charge card
Applying for a charge card is simple and can be done online in a few minutes. The eligibility requirements vary between products, but some of the general criteria include:
- Age. You must be at least 18 years old to apply for credit or charge cards in Australia.
- Residency. You typically need to be an Australian citizen or permanent resident.
- Annual income. Different cards will require different pre-tax income levels ranging from $20,000 to $100,000 and above.
- Good credit record. Most charge cards require that you have a high credit score, and that you have no history of bad debt or payment defaults.
Charge cards can be a useful way to free up your cashflow if you can pay your balance in full each month. If you prefer to carry a balance from month to month or don't think you'll meet the eligibility criteria, you may want to compare credit cards instead.
Frequently asked questions
How much can I actually charge to a charge card?
Although these cards don't have set credit limits, purchases are approved based on factors such as established spending patterns, credit score, repayment history and declared financial resources. As you establish a relationship with your charge card provider, the amount chargeable to your card should increase.
Can I get supplementary charge cards for my family or employees?
This is usually possible as long as the nominated family member satisfies the card provider’s requirements, such as being over 18 years of age. As the primary cardholder, you will be completely liable for all supplementary card spending.
Do charge cards build credit?
Even though charge cards aren't technically "credit cards", applying for one will leave an enquiry on your credit report. Repayment history will also be reported to credit bureaus, so they can help you build your credit history.
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Sally McMullen is a creative content producer at Finder. Sally has written about credit cards for almost 5 years, authoring almost 900 articles on Finder alone. She has also been published in Yahoo Finance, Dynamic Business, Financy and Mamamia, as well as Music Feeds and Rolling Stone. Sally has a Bachelor of Communication and Media Studies majoring in Journalism (Hons) from the University of Wollongong.