Money: The card that's fit for a king
Sudden craving for two dozen hamburgers? A new Cadillac? A charge - not credit - card is for you.
Wednesday 27 January 1999
All charge cards require your account to be cleared in full within a set period, usually one month. If you fail to pay off the balance, expect your card to be cancelled, an adverse reference to go on your credit history, and for the card provider to pass your debt to a local credit-collection agency.
What they offer in return for such draconian repayment requirements is convenience and immediate spending power. Some cards have no pre-set spending limit, others go up to pounds 15,000. They are widely accepted: during the siege of Sarajevo, for example, American Express charge cards were used by journalists in the city's hotels.
Other charge cards are mostly part of the Visa or MasterCard payment systems. You can use them very widely throughout the world.
Expect to pay an annual fee for a charge card, ranging from pounds 37.50 for American Express's standard green card up to pounds 150 for NatWest Bank's Premier MasterCard.
Some providers only issue cards to those meeting minimum income requirements, typically of between pounds 25,000 and pounds 40,000 a year. Others, notably American Express, take a discretionary approach, based on looking at applicants' wider circumstances, including home ownership.
Some banks issuing cards offer an overdraft facility linked to spending on the card. These are discretionary, and most charge 2.5 per cent above the bank's own base lending rate.
You can use charge cards at most UK outlets and there is no transaction charge on the user. Card providers charge retailers fees on a percentage basis. You can also use the cards for UK cash withdrawals. Most will charge you 1.5 per cent of the amount, but British Airways Diners Club push this up to a hefty 4 per cent with a cash minimum of pounds 4.
Amounts you spend abroad are translated into your home currency at the going rate of exchange, and an administration charge, also known as a foreign usage loading, is added, which ranges from 2 to 2.75 per cent according to which card you are using.
Because of their flexibility, however, charge cards are popular with business travellers. They are an easy way to book airline tickets, hire cars or pay for hotel bills. Perhaps this is why some cards offer free Air Miles as a reward for spending. American Express has a more complex reward point system. Spend pounds 5,000 annually on either its Green or Gold cards, and you qualify for a weekend at any IBIS hotel in Spain.
Charge cards also offer a range of other insurance benefits of use to travellers. All give free travel and accident insurance. Midland Bank's gold card offers a miserly pounds 25,000 maximum cover, but others offer cover worth up to pounds 500,000.
This cover only pays out if you suffer accident or death resulting from the purchase of a ticket through the relevant card. If you are on a scheduled flight which crashes then all cards will pay out to your next of kin.
Other benefits include free lost or delayed luggage insurance, and cover the cost of extra tickets bought because of flight delays and cancellations. Many also offer personal liability insurance: spill an in-flight coffee pot over your neighbour and you are covered for any injury or loss of earnings claim they might make against you.
Some cards also offer a free extended warranty on items purchased with it. Also look out for free card protection; if your card is stolen and used, you will not have to pay off the amount the thief has spent on it.
Finally, most cards offer free "purchase protection" covering the value of items bought with the card against theft or damage, some for up to 100 days after the date of purchase.
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