The item is somewhat overpowered, and can be balanced by reducing the effect or imposing a higher cost.
The item's description is mostly clear, although it has some ambiguities:
In "the highest level of spell slot available to you", the "available to you" clause may have ambiguous interactions with items like a Ring of Spell Storing. It is also unclear whether "available" includes spell slots that have already been expended. A clearer phrase might be "the highest level of spell slot granted by your class features", or something similar.
The term "your spell save DC" is ambiguous if the character has levels in multiple spellcasting classes that calculate spell save DC differently, such as wizard and cleric.
As a small semantics nitpick, the item should regain charges, not gain charges.
Since the number of charges scales with the wearer's highest spell slot, the item would be powerful at any level of play.
Rarity is subjective, and has little impact on the item's mechanical usage in-game. "Rare" is fine.
This item is equivalent to granting multiple free castings of a Blindness/Deafness spell. Thus the amulet effectively reproduces the spell effect, but without the action economy cost. The wearer can expend multiple charges to target multiple creatures, whereas Blindness/Deafness normally requires expenditure of higher level spell slots to do so.
Yet the amulet is even more efficient, since it can blind one creature per charge, whereas Blindness/Deafness can blind a number of creatures equal to the spell slot minus one. For example, a 5th level sorcerer could spend a 3rd level spell slot (and their Action) to blind 2 creatures with Blindness/Deafness. With your amulet, this sorcerer could instead spend that 3rd level spell slot to cast Fireball, and then blind 3 creatures who had taken fire damage. In theory, the amulet grants the benefit of a once-per-day Blindness/Deafness, cast at one level higher than the wearer's highest level spell slot, with the additional option of dividing it into lower level effects.
Also, unlike Blindness/Deafness, the amulet ignores limitations on range, line of sight, and line of effect. It could potentially blind targets who are unseen or have full cover, such as when Fireball damages a creature who is hidden behind a corner.
If the amulet applied to all targets of the spell, not just one creature, then its effect would be equivalent to higher level castings of Blindness/Deafness. For example, if the caster's Fireball inflicts damage on 8+ creatures, then expending one charge from the amulet would be akin to casting Blindness/Deafness with a 9th level spell slot. This modification would make the item significantly overpowered.
Another data point for comparison is the Gem of Brightness. While it can potentially blind multiple creatures, it does require an action to activate, it has a range limitation, and its charges are not renewable. Each activation is more powerful than one casting of Blindness/Deafness, even at higher level spell slots, but the overall item is balanced by its expensive activation cost.
Possible ways to balance this item:
- The effect should require "a creature you can see", not just "a creature". There should also be some range limitation, such as 30 or 60 feet, to make this item comparable to other spellcasting features and magic items.
- If activation had some action economy requirement, such as a bonus action or reaction, then you could balance the item via its opportunity cost. It's still better than casting Blindness/Deafness with the Quicken Spell metamagic, but at least this modification would force a tradeoff versus other options for the wearer's bonus action/reaction.
- If you reduce the duration to 1 round (i.e., until the end of the wearer's next turn), then the item's no-action cost could be justified, being almost comparable to a monk's Stunning Strike feature. Even one round of blindness can swing a combat encounter in the party's favor, especially if they're facing one or a small number of enemies.