What do you know about credit cards
Credit card explained in simple terms
You use a credit card to withdraw money, pay or make bookings. But how do credit cards actually work, what different types are there and what do you have to pay special attention to? You can find our financial flow recommendation for the best credit cards at the bottom!
- Due to their high level of acceptance, credit cards are used worldwide for payments, withdrawals and online shopping.
- "Real" credit cards are only the charge cards and the revolving cards, for which a credit line is granted and the settlement takes place after one month at the earliest.
- With debit cards, the amount used is debited directly or promptly from the associated account.
- In order to use prepaid cards, you must first load credit onto a collective account of the associated bank before using them.
- There are a few things that you should pay particular attention to with credit cards: annual fee, repayment modalities, debit interest, costs for withdrawals, foreign currency fees and acceptance. Sometimes there are additional services included, but these are only really worthwhile in rare cases.
- First you should be clear about what exactly you need for a credit card: with or without a current account, is a debit card sufficient or does it have to be a credit card with a credit line?
- You can then do a credit card comparison and get more information about different credit cards from us. By the way, our recommendations for a “real” credit card with a current account are the DKB credit card, for a credit card without a current account we recommend the Hanseatic GenialCard.
- When you have decided on a provider, you can apply for the credit card online or in the branch. If your credit rating is correct, the card should be with you in a few days. If your credit card application is rejected, you can take a look at our guide to credit cards without a SCHUFA query.
What is a credit card and how does it work?
A credit card is a “payment card” issued by a credit card provider and credit card issuer. If your application for the card is approved, you can use it to withdraw money, pay and make bookings anywhere in the world. With a “real” credit card, you will be granted a small monthly loan with a fixed credit line, which you then pay off monthly or over a longer period of time.
Finance Flow Video: What Are Credit Cards? And are they worth it?
Credit cards are each assigned to a credit card provider that is responsible for the payment system, i.e. the technology behind the credit card. These providers issue licenses to use this system and guarantee traders, for example, that they actually receive their money. The best known of these providers, who also share 90% of the market, are Visa and MasterCard, which are most widely accepted in the world. The third largest provider is American Express.
Credit card issuers, in turn, are credit institutions (mostly banks) that receive so-called issuing licenses from a credit card provider in order to use the respective payment system. The issuers also determine the terms and conditions for a credit card. Sometimes there is also cooperation between the issuing banks and companies such as Amazon or Ikea.
Credit cards: “Real” credit card, debit card, prepaid card
There are 3 types of credit cards:
Actually, only the real credit cards, which are again divided into charge cards and revolving cards, are actual credit cards. Because only with these cards does the credit card issuer (usually a bank) grant the user a small loan, which he has to repay monthly or in a fixed period of time.
In the case of debit cards, the amounts used are deducted from the relevant current account directly or within a few days. You can then use this account to make transfers or apply for direct debits. With prepaid cards, on the other hand, you pay credit into a collective account at the bank, which is then assigned to your card. This is why you cannot use the usual account functions with a prepaid credit card.
“Real” Credit Cards - Charge Cards & Revolving Card
Charge cards are considered to be actual credit cards. With them, the user receives a certain credit line. He can use this freely in the billing month. At the end of the month, the credit card will be billed and the outstanding amounts will be charged. At the beginning of the new month, the invoice amount is usually debited from the agreed giro account by direct debit. With some charge cards, the user has to make a transfer himself. These cards include, for example, the DKB credit card or the comdirect Visa card.
Revolving cards are also “real” credit cards. In contrast to the charge credit card, a revolving credit card does not always charge the entire monthly amount, but only a previously agreed portion. The usual rate for this partial payment is 10-25%, but an individual percentage can also be set. However, we advise against using this function and repaying the amount used monthly - otherwise high interest rates may arise. In addition, most providers have a minimum repayment that you have to make monthly. The Revolving Cards include, for example, the Hanseatic Bank Genialcard or the Barclaycard Visa.
The Debit Card - direct debiting from the account
The debit card is actually not a real credit card - but it is often called that. No credit line is granted with a debit card. It can therefore only be used if the linked current account has sufficient funds. All transactions are deducted from the relevant current account directly or within a few days. That is why it is also called “debit” card - debit comes from English and means “direct debit”.
However, some banks offer an overdraft facility that is similar to a credit line. Interest is also credited here, but there is no monthly billing or partial repayment.
The associated accounts for debit cards are always provided with an IBAN (international bank account number) and a BIC (bank identifier code), which you can use for transfers or direct debits.
By the way, the most famous debit card in Germany is the Girocard (formerly EC card). It is issued to most current accounts and is equipped with the V-Pay (Visa) or Maestro (MasterCard) payment system. You can use it to withdraw and pay money domestically and abroad. There are also debit cards that have a credit card number and are equipped with the classic Visa or MasterCard payment system that is typical for real credit cards. This means that these cards can also be used for online shopping or hotel bookings and only differ from charge cards and revolving cards in the type of repayment. These credit card-like debit cards include, for example, the N26 Mastercard or the ING Visa.
The prepaid card - Pay with top-up credit
A prepaid credit card works similarly to a debit card. It can only be used if there is sufficient cover, as no credit line is granted here either. However, a prepaid card is not linked to your own current account; instead, you transfer your credit to a collective account of the credit card issuer, stating your card number. The money can usually only be transferred from a fixed reference account. This is why you cannot, for example, have a salary paid into this card account or make transfers to third parties yourself.
Prepaid credit cards are particularly worthwhile for minors who can dispose of their pocket money in a regulated manner. Prepaid cards are also useful for trips where you load the planned budget onto the associated card account beforehand.
What do you have to pay attention to with a credit card?
There are a few things to keep in mind when choosing a credit card. Depending on what you want to use the card for, these points are of different importance. Here is an overview of the most important factors:
Current account: with or without?
The decision as to whether you choose a credit card with or without a current account depends largely on whether you need an (additional) account. If you already have a good checking account that you are too happy with, a credit card without a checking account is worthwhile. This then means less effort for you, as you do not have to transfer any money to an extra account, but the credit card billing takes place from your current account.
In addition, some credit cards with a current account, such as the DKB or the ING, require a minimum amount of money (usually of at least € 700 per month) in order to receive favorable conditions. You can find out which cards are worthwhile with or without a current account in our recommendations.
Annual fee: only useful for additional services
You can now get most credit cards without a fixed annual fee. Most credit card issuers then finance themselves through debit interest that is charged to you for partial payments, fees for withdrawals or payments outside the euro zone.
An annual fee only makes sense if you also receive extra services for it. These include, for example, various travel and health insurances. In most cases, however, it is much cheaper to take out exactly the insurance you really need separately.
However, some cards also offer other extras, such as cash back, which can save you money when ordering online, or the opportunity to collect miles. An example of this is the Eurowings credit card, with which you receive one mile for every euro you spend. This can be worthwhile for you if you travel a lot or pay a lot with your credit card.
Repayment & debit interest: Attention with preset partial payment!
Payback is an important factor that can easily be overlooked with credit cards. Because with the so-called revolving cards, a partial repayment is often already set. This means that after one month (in some cases up to 3 months) you start repaying the amount you have spent - but only with a small part. The so-called debit interest is then due on the remaining amount, which is in the double-digit range in most cases.
So you should definitely avoid that. In most cases, this is also possible by manually setting the partial repayment to 100% (in online banking or the app). This means that the owed amount is always debited in full on a monthly basis.
With other credit cards, on the other hand, you cannot choose to repay by direct debit, for example with the TF Bank credit card. This means that you have to make the repayment yourself every month via bank transfer. If you forget that, the so-called debit interest is due here as well.
By the way, debit interest is also due when you go to the overdraft facility. For cards without a partial payment option but with an overdraft facility, the interest rates are usually in the high single-digit range - so that too can be expensive. So it is important to make sure that the debit interest on a credit card is as low as possible and ideally not even due.
Foreign currency fee: important outside the euro zone
The foreign currency fee is calculated when you pay or withdraw money outside of the euro zone. This fee is usually around 1-3%. So it is especially important when you handle larger amounts. However, there are also cards that do not charge a foreign currency fee, such as the Barclaycard Visa. So if you are traveling a lot outside of the euro area, you should pay attention to a low foreign currency fee. You can still incur costs if your credit card issuer or the machine operator you withdraw from charges extra fees for the money you withdraw.
Withdraw cash: note costs / limit
When withdrawing cash with credit cards, there are a few things to consider. This is because very different costs can be charged here. You have to consider 4 factors:
Do you withdraw at home or abroad?
If abroad: euro zone or not euro zone?
Is there an additional foreign currency fee?
Is there a free withdrawal limit?
Before you apply for a credit card, you should find out how many costs and fees you will have to pay in each of these cases. Depending on whether you pay a lot or a little in cash or often travel abroad (in euros), you can decide whether a credit card is suitable for you or not.
Some credit cards also set a limit on how much money you can withdraw per day or per month. You should also find out about this beforehand so as not to get into trouble. With other credit cards, such as the Barclaycard Visa or the DKB credit card, you have to withdraw at least € 50 per transaction.
Danger! Regardless of the conditions of a credit card, cash withdrawals can always incur costs for the machine operator. However, machine operators are obliged to report these costs during the withdrawal process. Some credit card issuers offer to reimburse these costs in retrospect, but this process is usually quite time-consuming.
Acceptance: Which credit card can I use where?
Another important factor is where a credit card is and is not accepted. Because credit cards are not accepted everywhere in Germany. Smaller shops, for example, sometimes only accept girocards that work via the V-Pay or Maestro system that is widespread in Germany. However, you can use your Visa or MasterCard in all larger shops and at most machines. You can tell where you can use which card by the respective logo, what is shown on the machine, often on the door of shops and restaurants or on card readers.
Visa and MasterCard are also the largest providers of credit cards in other countries around the world. Both are represented roughly equally, which is why it doesn't really matter whether you have a Visa or MasterCard credit card.
Cards from providers such as American Express or Diners Club are less accepted. Here you have to find out beforehand where you can use the cards.
Cash Flow Recommendation: These credit cards are really worth it
Here you can see, after research, community survey and model development, the evaluation of our large credit card comparison:
Best credit card without a checking account
In our large credit card comparison, the Hanseatic Bank Genialcard won as the best credit card without a current account with 4 stars. It is characterized above all by free withdrawals at home and abroad and no foreign currency fee. Debit interest rates are also relatively low at 12.82%. The card also offers online cash back of up to 13%. Please note the withdrawal limit of € 500 per day for the card.
Best credit card with checking account
We can choose the DKB credit card with 4 1/2 stars as the best credit card with a current account. The DKB Visa also has no withdrawal fees at home or abroad and no foreign currency fee. For this, however, it is necessary that you use the associated account as an active customer, i.e. have a monthly payment of at least € 700. In addition, you always have to withdraw at least € 50.
More guides on the topic
If you want to know more about the topic or are looking for information about certain credit cards, you can take a look at our other guides:
Overview of individual credit cards
Credit card themes
frequently asked Questions
- What types of credit cards are there?
These credit card models are currently possible in Germany: Charge Card (classic credit card with a credit line that is granted to the customer and billed monthly from a reference account), Revolving Card (only 10-25% are billed monthly, usually a monthly minimum repayment), Debit card (similar to the EC card, without credit line) and prepaid card (similar to the debit card, money must first be transferred to the relevant account before payment can be made).
- What is a credit card good for?
On the one hand, credit cards are helpful for the simple processing of payments (also abroad) and, on the other hand, they give the user a certain degree of flexibility with regard to the account balance, since most credit cards have a credit line.
- What are the advantages of a credit card?
The biggest advantages of a credit card are the liquidity, the additional services offered, the simple payment abroad, premium offers such as lounges and insurance, which are often offered very conveniently for credit card users.
- Are there any risks with credit cards?
Of course, there are also risks associated with using credit cards. These include the risk of over-indebtedness with classic credit cards, hidden fees for providers with poor conditions and confusing bookings due to different accounts and payment flows.
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