I bought a 5C collet chuck for two reasons. I already had a 5C collet set, albeit only by 1/16ths, and I liked the slim nose on the 5C chuck which allowed me greater flexibility for certain operations.
A down side is the lack of grip range of a 5C collet which will require minimally a 1/32" set of collets and preferably a 1/64" set. The cost of a full set of 5C collets would exceed the cost of a set of ER32 or ER 40 collets. Changing out collets on my collet chuck also requires a full 32 turns of the chuck key, which can be annoying.
I disagree with the idea that 5C collets only grip the work at the nose of the collet. Were that true, the work would be unstable in the chuck. When a 5C collet is closed, it first contacts the the work at three points ,H in the left drawing, at the nose of the collet, as the collet jaws bend in a simple arc in region B in the upper right drawing. The collet also makes contact with the 5C socket at point D with a slight gap at E. The work is only in contact at C in the drawing.
View attachment 441662
As the chuck is further tightened, the simple arc in region B changes to a S shape with bends at F and G as shown in the lower right drawing, closing the gap E. Fully tightened, the collet will be in contact with the socket all along the surface between D and E and the region A will again be parallel to the collet axis, gripping the work along three axial lines along H and stabilizing it.
The limit governing the ability to grip an undersized cylinder will be determined by the three gaps in the collet. The amount of force required to close a collet will increase as the difference in size between the collet and the work increases. In the case of using a lever type collet closer, the available force may very well be insufficient to that required to fully close on the work, resulting in a three point grip on the work rather than three lines.