The credit card can be expensive

Credit cards are also often used in Germany for cashless payments. However, many offers have hidden costs. Anyone who decides to get a new credit card should keep an eye on these.

In addition to the Girocard, the former EC card, and a debit card, most consumers' wallets also contain a credit card. This still serves its purpose when making cashless payments, but can also result in surprisingly high costs.

A credit card is often necessary abroad

A credit card is often necessary, especially when booking a rental car or a hotel, but also when withdrawing money from an ATM on your next vacation. This is especially true for trips beyond Germany's borders, says Thomas Kehl from the consumer portal Finanzfluss: “Especially for those who travel outside of Europe, i.e. in the USA or in Asia, it makes sense to have an international credit card because they are more widely accepted there. Sometimes you reach your limits with a debit card there.”

The main advantages are the so-called “credit limit” that a credit card provides. Hotels or rental car companies use this as a kind of guarantee for a booking. Neither the Girocard nor a debit card, which many banks now provide free of charge, offer this function.

Overview of your own finances is lost

The downside of the short-term credit offered by credit cards, however, is that many consumers with one or more credit cards easily lose track of their own finances. This is not without its risks, says Ralph Wefer from the comparison portal Verivox: “With a credit card, you postpone part of your running costs into the future, which makes it a little more difficult to keep track of things. A quick look at your account is no longer enough to immediately see how much of your monthly budget is left.”

And if you lose track of this, you can quickly fall into an “interest trap” set by credit card providers. Many of the companies' offers advertise a free card. However, this often only means that there is no annual fee for the card. Depending on how the credit card is used, considerable costs can arise.

Dear Consumer credit as interest on the credit card

Most credit cards are equipped with a so-called partial payment function. Only part of the loan is paid off, namely through a payment from the checking account. The customer pays interest on the rest – and very high interest at that: 20 percent or more per year is not uncommon. Consumer experts like Wefer recommend taking out a consumer loan, which is usually much cheaper, if you want to avoid high interest charges on your credit card account and occasionally end up in the red.

The installment payment function should be deactivated as soon as possible. The amount used on the credit card account will then usually be offset every month by a payment from the linked checking account, and no interest will be charged.

In addition to the interest costs, there are often other costs when using the credit card, for example when paying abroad or withdrawing cash – both at home and abroad. Here, too, the credit card companies often charge more than with the Girocard and debit card.

Amazon launches new credit card

This also applies to the new credit card from the internet giant Amazon, which is currently heavily promoting its product in Germany. Here, too, there is no basic fee for users, but the card is not free either: “Firstly, the Amazon card is not for globetrotters outside the Eurozone. If I use the card there, I pay a 1.5 percent surcharge on the exchange rate,” explains Wefer, “and cash withdrawals from ATMs also cost extra. A 3.9 percent fee is charged per withdrawal. So for 100 euros, that still costs 3.90 euros.”

The Amazon card also comes with an installment payment function and a credit interest rate that is among the highest in the industry, according to consumer advisor Kehl from Finanzfluss: “If you don't set it differently, the debt will roll over the next month, so to speak, and then an effective annual interest rate of 20.13 percent will apply. There are cards that are more expensive, but there are also many that are cheaper.”

Amazon already offered a credit card together with Landesbank Berlin (LBB), but the collaboration ended last year. For the new credit card, the US company has now started a partnership with Open Bank, a subsidiary of the Spanish banking giant Santander. For Amazon, the card is primarily a means of customer loyalty. Customers can use it to collect “points” that they can later offset against further purchases.

Additional packages with credit card

Another way credit card companies can build customer loyalty is to offer additional services “piggyback”. These can be insurance, such as baggage insurance or travel cancellation insurance. Or users can collect “air miles” every time they use their card and then get a cheaper ticket price from certain airlines.

A high starting credit when concluding the credit card contract also attracts some interested parties, says Finanzfluss expert Kehl: “I open a credit card and then get 5,000 euros in credit in advance, i.e. 5,000 euros of credit to finance a vacation, for example. I would definitely stay away from that, because the credit card interest rates are just extremely high.”

Compare before Conclusion of contract

Like other comparison and consumer portals, Verivox and Finanzfluss have also compared the current credit card offers in complex overviews. Potential customers should consult such comparisons and check their own usage behavior before concluding a contract. However, the experts recommend that the installment payment function should be deactivated as quickly as possible in all cases.