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There are different types of credit cards. Which one suits you best depends on your personal needs. © Andrea Warnecke/dpa-tmn
There are different types of credit cards: debit, prepaid, charge or revolving. But not every credit card is suitable for every need. A guide.
Berlin/Lüneburg – Whether at an ATM abroad or when booking a rental car or hotel: you often cannot do without a credit card. Statistically, according to the Bundesbank, every German has two such cards in their wallet. Some banks now only issue credit cards to their customers, and the traditional Girocard is no longer available in some cases.
If you are looking for a credit card, you will find many offers that often offer additional insurance or discounts. But before comparing terms and conditions, you should consider how you want to use your card. This will determine which type of credit card makes sense for you. After all, there are different variants that differ in the billing method, for example. Some are not accepted everywhere. Therefore, the main premise is that the type of credit card suits the consumer.
1. Charge card: uncomplicated for travel and bookings
According to the Association of German Banks, charge cards are the credit cards that are most commonly issued in Germany. “Card transactions are collected and usually billed once a month,” explains Matthias Lange, payment transaction expert at the Association of German Banks. The transaction must be within the credit limit granted to the customer per card. Whether there is enough money in the account to cover the expenses is not checked when making the payment.
“Before the money is debited from the checking account, customers usually receive a statement to check,” says Lange. “If necessary, they can then quickly deposit money to pay the bill.” There is usually no interest on the loan until the debit.
The credit limit makes a charge card particularly suitable for travel – especially since it is generally accepted everywhere abroad. This can be used to make rental car or hotel bookings, for example, for which a deposit or security is often required. “This amount is blocked in the credit limit, but is not deducted from your current account,” explains Lange. You can also pay online with such a credit card.
2. Revolving credit card: flexible credit limit with high interest rates
The revolving credit card works in a similar way to a charge card, but only a certain part of the credit limit is automatically debited each month. For example, five percent. The exact amount is stated in the credit card account and can be adjusted by the customer. The remaining amount remains as a loan. This does provide financial flexibility beyond the end of the month. However, according to Philipp Rehberg from the Lower Saxony Consumer Advice Center, it leads to debts accumulating. “This incurs high interest rates,” he says. “Depending on the provider, up to 20 percent per year.”
If you don’t regularly check your credit card account and pay off your debts yourself, you can quickly lose track of your liabilities with revolving models. Consumer advocate Rehberg therefore believes that such cards make little sense. However, many people don’t even know that they have such a credit card – that’s his experience from everyday consulting. That’s why it’s important to check the contract terms carefully.
3. Debit card: clear view of spending and global acceptance
Many banks have been issuing debit cards to their customers as standard for several years. They are not really credit cards, because with debit cards the turnover is debited directly from the current account, just like with a conventional Girocard. There must be enough money in the account for this. “That’s why debit cards are suitable for customers who like to have a good overview of their spending,” says Lange.
The reason why they are still called credit cards is because of the payment system they use: This is the system of the large credit card companies such as Visa or Mastercard. This means that – unlike a classic Girocard – they can also be used abroad to pay and withdraw money, as well as on the Internet. “Debit cards are therefore suitable for anyone who travels outside of Germany or does online shopping,” recommends Rehberg. Even those with poor credit ratings can get a debit card.
However, such cards do have one disadvantage, says the financial expert. “It may be that some merchants do not accept debit cards. It can be particularly difficult if a deposit has to be paid” – for example when booking a rental car. It is sometimes possible that providers block money in the checking account for security reasons. However, it can take a few days until this is released again.
4. Prepaid card: ideal for young people, limited flexibility
Prepaid cards only work if money is transferred to the credit card account beforehand. Only this amount can be spent. “Prepaid cards offer complete cost control. They are therefore particularly suitable for children and young people, for example when they travel abroad on a student exchange,” says Lange. Companies sometimes also issue such cards to their employees.
But the range of uses for prepaid credit cards is limited. Children can use them to withdraw money when travelling or to pay in a restaurant, for example. “But you can’t always use them to book a hotel or rental car,” Rehberg points out. If you’re planning on doing this, you should find out beforehand whether the provider accepts prepaid cards.
