Financial Guide

Which credit card type is the right one for you?

 

One credit card is not like another – there are six types of credit cards in total which mainly differ in the way the money paid with the card is billed.

Which credit card is the right choice for you depends on your personal financial situation as well as on your preferred billing method. Some cards make it easier for the owner to keep track of the spendings as other credit cards do. In addition, certain groups of people, e.g. pupils and students are only granted certain types of credit cards by their bank.

In the following, we will give an overview of the different credit card types. If you are still unsure which credit card fits best afterwards, you will find additional information on this topic here.

 

Revolving Card

The so called “Revolving Card”, also known as Credit card, is the classic among the various types of credit cards. Customers who own a Revolving Card regularly receive a bill with all their spendings that have been made in the corresponding period. The owner of the card has two options: repay the amount in one go or agree on an instalment repayment. By choosing the latter option, the customer is granted a credit covering the spent amount.

Depending on the card issuer an instalment repayment can be arranged in different ways. You should check your bank’s conditions thoroughly beforehand. The same is true for the height of the interest which can differ a lot depending on the provider. You should be very careful as in some cases interest rates can be extremely high. As with most credit cards, a liquidity check is made when you apply for a Revolving Card.

 

Charge Card

The so called Charge Card is very popular. It is mostly offered in connection with a current account where the spent money is deducted from. Owners of a Charge Card also receive a monthly bill listing all their credit card spendings. The difference to the Revolving Card: repayment in several instalments is not possible. All spendings that have been done within the billing period have to be repaid in one go.

Thus, owners of a Charge Card are granted a 30 day-credit until the end of the billing period, only. Normally, customers do not have to pay any interest within this time which is a reason for the popularity of this card type. Usually, Charge Cards have a fixed line of credit so that unlimited spendings are not possible.

 

Prepaid Credit Card

As the name implies, a Prepaid Credit Card has to be topped up with a random amount of money before you can use it. This principle is known from mobile phones where prepaid SIM cards are very common. This type of credit card can only be used for payments as long as the corresponding amount of money has been topped up and is still available. An overdraft is not included.

To be issued a Prepaid Credit Card, a liquidity check (in Germany it’s called “Schufa”) is normally not necessary. This is why this credit card type is also suitable for people with a low solvency, e.g. pupils and students. By deducting all payments right away it is also easier to keep track of your finances.

When choosing a Prepaid Credit Card you should check if there are any charges for using the card or for withdrawing money. This is sometimes the case and might cause a nasty surprise.

 

Daily Charge Card

The Daily Charge Card is a mixture of the Prepaid Credit Card and a Charge Card. As with the Prepaid Credit Card, you can top up a certain amount of money which can then be used for payments and withdrawals. The difference to the Prepaid Card: When the topped up money has been spent, you can still use the card. Those payments are collected and deducted from the corresponding current account at the end of the billing period.

 

Debit Card

The Debit Card is  – strictly speaking – no real credit card as the paid amounts are deducted directly from the account that is connected to the card. In Germany, the Debit Card is mostly known as “EC-Card” and can be found in most peoples’ wallets.

 

Online Credit Cards

Online Credit Cards are not physical cards but rather combinations of numbers that can be used for online-shopping or other payments in the internet. Logically, Online Credit Cards cannot be used in a local shop or for cash withdrawals.