What Is a Charge Card?

Charge cards are similar to credit cards because they’re a form of revolving credit. You use a charge card to pay for products and services and then pay back what you spent at the end of a billing period.

However, there are some key differences between charge cards and credit cards: charge cards don’t have pre-set credit limits, and you must repay the entire balance every month. Plus, charge cards usually have a considerably higher annual fees than regular credit cards.

Australia got its first charge card nearly 70 years ago when Diners Club entered the local market. The international company’s personal, business, and corporate cards dominated the industry for decades before officially exiting the Australian market earlier this year. Today, American Express is the only card company that offers personal charge cards in Australia, though a few other providers still issue business and corporate charge cards.

How do charge cards work?

Charge cards work like credit cards — you pay for items using credit, which you then pay back. The issuer sends you a statement at the end of the billing period (typically every month). When your bill is due depends on how the card is set up and the terms offered.

For example, the American Express Platinum card — the only personal charge card we’re aware of on offer in Australia — offers 44 cash flow days, meaning cardholders have 44 days after the transaction to pay the balance. Statements are typically issued every month (roughly 30 days), so the bill is usually due a few weeks afterward.

No minimum payments

This is where charge cards differ dramatically from credit cards.

With regular credit cards, you can make minimum monthly payments and carry the outstanding balance over time rather than repaying the entire balance at once. Interest is then charged on the unpaid balance until the debt is paid.

In contrast, charge cards require you to pay off the balance in full every month. Failure to do so will incur steep charges, such as 3% of the overdue amount. So, if you have an overdue balance of $1000, a 3% charge would be $30. If you leave the balance unpaid for a year, that $1,000 would grow to roughly $1,426 — accruing close to 50% of the original debt in late fees.

No pre-set credit limit

Charge cards may not have predetermined credit limits, but this doesn’t mean they’d give you access to infinite credit. Instead, the issuer approves each charge you make based on several factors, such as your spending patterns and credit history.

Advantages of charge cards

Charge cards, unlike different types of credit cards, aren’t common for personal use in Australia, but do exist. And for some, charge cards can be an effective financial tool.

Potential benefits of personal charge cards include:

Stronger incentives to pay off the balance. The steep fees for not paying off your balance in full can be an incentive for clearing your balance regularly.
Greater purchasing power. A flexible spending limit means you can make purchases without worrying about exceeding a pre-set credit limit.
Generous rewards. Charge cards are typically connected to membership rewards programs where you can accumulate points on your spending and then use them for various rewards, including flights, hotels, other travel costs and gift cards.
High-end benefits. Charge cards started as premium options for travellers and generally boast the types of features you’d expect from high-tier credit cards, like access to airport lounges, travel credits and hotel loyalty programs. Other exclusive perks might include concierge services, dining benefits, shopping perks, complimentary news subscriptions and exclusive discounts and promotions. Travel insurance, extensive purchase protection coverage and fraud protection are a few other benefits that may be included with charge cards.

Disadvantages of charge cards

Unless you’re confident you can actually maximise the card’s rewards and benefits by paying off the balance each month, a charge card may not be worth it for personal use. However, steep costs and the potential to run up late fees aren’t the only risks to consider.

Here are a few of the key disadvantages of charge cards:

Steep annual fees. The American Express Platinum Card costs $1,450 per year — considerably more expensive than a regular credit card. Business and corporate charge cards can be less, but costs vary depending on the number of cards issued and how the account is managed.
Penalties for not paying your bill. While charge cards don’t incur interest on overdue balances, you’ll probably face a late fee if you don’t repay the debt by the statement due date. Your credit score is also likely to take a hit if the card issuer reports the missed payment to the credit agencies. Remember, you can’t only pay a minimum amount to avoid a late fee — you’re on the hook for the whole balance.
Less flexibility. Some people may find charge cards less flexible for consumer spending because they’re only designed for making purchases. You can’t transfer balances onto them or use one to withdraw cash from an ATM.
Strict eligibility requirements. Generally, you’ll need to meet higher credit score standards to apply for a personal charge card. For example, applicants for the American Express Platinum Card cannot have a history of bad debt or defaults. To get a charge card for business spending, you’ll likely need to provide an Australian Business Number (ABN) and share details about your business.

About the Authors

Kristie Kwok

Kristie Kwok is a personal finance expert and former contributing writer at NerdWallet Australia. She has covered personal and business finance for almost 10 years. She is a qualified chartered…

Georgia Rose

Georgia Rose is a lead writer on the international team at NerdWallet. Her work has been featured in The Washington Post, The New York Times, The Independent and The Associated…