Financial Guide

Credit cards and their various billing methods

 

Depending on the credit card you choose, there are different ways in which your transactions are billed. Each billing method has its own advantages and downsides and some methods are more suitable for some groups of people than others. To simplify the process of understanding which billing method is right for you and which type of credit card offers which billing method, we will introduce them to you in detail here.

 

Monthly billing with optional instalment repayment: The classic one

Monthly billing with optional repayment of all purchases in instalments is the original idea behind the credit card. As with a loan you repay your spendings in multiple instalments, including interest. At first, one could think that this is a convenient solution for expensive purchases. However, as the interest rates are quite high, it often makes sense to consider a proper loan with cheaper conditions as an alternative.

Monthly billing with optional instalment repayment is typical for the so called Revolving Card.

 

Regular billing

This billing method is very popular and should be familiar to a lot of people. As with the Revolving Card, the billing period is 30 days, meaning the bank grants its customer a credit for this period. In some cases, the billing period is only two weeks, so it’s worth checking the bank’s conditions carefully.

The difference to the Revolving Card is the lack of the optional instalment repayment. All collected payments are automatically deducted from the connected bank account at the end of the billing period. In order to keep track of all the spendings and to avoid nasty surprises, it is recommended to take notes of the money spent.

The credit card type that uses regular billing is called Charge Card.

 

Instant billing

If you prefer having your payments and transactions deducted from your current account right away, instant billing is the right choice for you. Although this billing method is not in accordance with the original idea of the credit card as no credit is being granted, it has one big advantage: it’s easier to keep an eye on your spendings.

Typical for instant billing is the Prepaid Credit Card. Although the Daily Charge Card also offers this billing method, this card type jumps in with a credit once the topped up amount of money has been used. In this case, all additional spendings are collected and billed by the end of the month.

One could now think that a normal Debit Card would be sufficient in this case as it also offers this billing method. However, many online shops require you to either have a credit card or pay additional fees if you choose a different payment option. In addition, a credit card can be extremely convenient when travelling abroad. Visa and Mastercard are accepted worldwide at all their cash machines and enable you to withdraw money cheaply or for free.