What has become a matter of course today, but on the other hand is only known to very few: A credit card is also a financing instrument. This sentence may sound ironic to some readers, but if you compare the statistics of what is now being financed by credit card, then “some consumers live well above their means” because it simply loses the overview. Money that is in the wallet can be seen with the eye. Electronic money, on the other hand, is only visible to the eye at the end of the month: in the form of a hefty minus amount on the account. In addition, it is made easy for the credit card owner: there is no need for collateral or a separate loan agreement. Nevertheless, the original function of a credit card is in the loan area, even if the change has shown something different in recent years. In the past, credit cards were only issued to people who had good creditworthiness. Today, schoolchildren, students, trainees and unemployed people already receive a credit card.
Even the range of services itself can hardly be overlooked today, not to mention the fees incurred. Today, credit cards can not only be used to obtain cash, you can also use them to make cashless payments, and you can also use additional services such as bonus programs, VIP services or discounts. For this reason, customers now receive “better” credit cards with additional services in addition to their “simple” prepaid cards. Names such as debit card, charge card etc. are intended to emphasize the advantage for selected customers. There are currently four major credit card companies on the market: VISA, MasterCard, American Express and Baclays Card. These cards are offered separately for private and business customers, which is why they differ in price and performance.
The VISA Classic card is intended for people who only use the payment transaction functions and do without additional services. Those who travel a lot, however, are better off using the VISA Card Gold because of the cheap insurance. The same also applies to the MasterCard standard card, which is also intended for customers who only want to use the basic functions of a credit card: pay cashless and withdraw money. On the other hand, if you also want to use services, you are better served with the MasterCard Premium or MasterCard World Signia. The normal customer cannot even apply for the latter. But no matter whether VISA or MasterCard etc., the respective conditions always determine the issuing bank or the issuing company. Therefore, services and fees should be compared.
The different types of credit cards
Since there are a large number of credit card variants on the market, it is good to differentiate them according to the different criteria. In addition to the standard cards, which are only used for the basic functions within cashless payment transactions, there are also the premium cards, which are equipped with numerous additional services. The customer must therefore be clear in advance which services his credit card should include. Because there are considerable differences in the type of billing. For example, some cardholders have the option of having a certain limit on their credit card for an unlimited period of time, while others have to adhere to a certain limit as with a credit card. Today’s cards such as the Charge Card also have an agreed limit, but the open amounts must be paid again as part of the monthly statement. With this billing method, the credit card owner has a loan of around 8 weeks.
In addition to these different types of billing, there is also the debit card. It only has a very limited credit card function, because both the settlement and the settlement of the open amount do not have to be done monthly as part of the monthly statement, but rather a few days after the disposition. It thus corresponds to the system of the EC or Maestro card. Customers who have a low credit rating therefore receive this card. Customers with no credit rating or students, low earners, housewives or the unemployed have to be satisfied with the prepaid credit card. Since the card does not have a credit card function, this card can only be used to access capital that is in the credit card account as credit. It is therefore no longer possible to overdraw an account using a credit card.
Regarding the services, the consumer should also ask himself whether he needs these diverse services and functions at all, because these also increase the annual fee to be paid accordingly. For example, card providers are now able to provide people who are abroad a lot with additional services such as travel health insurance, transport accident insurance, luggage insurance and travel cancellation insurance. Here consumers should pay particular attention to the special conditions. Because there are cards for which insurance cover is only available if you also use the card. Others automatically pay when you have a card. It can quickly happen that an insurance premium is not paid by card and the insurance coverage expires.
Discounts are also often given to rental car companies, if you also pay by card. Or the cards come from mail order companies, so that when they are used, a five percent discount is always granted. There are also cards with bonus programs such as an airline miles program. Depending on the number of points, the cardholder can exchange them again as services. If you have a credit card with a VIP function, you also get a ticket that you would not receive by normal ordering, for example because it is a sold-out event, but the credit card company still has a small special quota here.
Credit card security and fees
Anyone who asks about the security of credit cards has to differentiate between the different possible uses. One way to use the credit card is to make cashless payments on the Internet. There is also the possibility of cashless payment in shops and the possibility of cash at the machine. When disposing of cash at the machine, you have to enter your personal PIN, the so-called PIN. If the ATM is misused, the cardholder’s own share is $ 100. In many shops, the PIN must be entered to pay for the goods with a credit card. Therefore, a certain level of security can also be assumed here.
Cash register systems, on the other hand, offer a greater risk of misuse, in which the customer signs on the receipt after entering his credit card. Here the system only records the card number, the expiry date and the check digit. But signatures can always be forged. But here, too, the cardholder is “off the hook”, because liability is solely borne by the business, since it is obliged to show the cardholder’s identity card. But in most cases this is precisely what is neglected. Those who make payments on the Internet are most at risk, because in many cases not even the credit card is required, but only the card details.
In addition to the costs, credit cards also incur fees. Here the bank – and not the credit card manufacturer – can freely decide which fees are to be charged for which services. It is therefore also worthwhile to find out about the various offers for credit cards. On the one hand, there is the annual fee to be paid, and fees are also charged for getting cash. There are also fees that may apply to cashless payments. The annual fee is independent of usage, so the amount is fixed. However, it depends on the scope of the services. Depending on the provider, amounts between 15 and 100 USD are incurred. In the case of cashless payment, usage-related fees apply. Almost no fees are charged today in Germany and in the dollarzone, only for foreign currencies on the Internet or at ATMs outside the dollarzone.