Guide: You need to know this about free credit cards
The credit card is an excellent addition to other payment methods. The credit card offers you a certain level of security, especially when shopping on the Internet.
When traveling abroad, it is not necessary to carry large amounts of cash and exchange them in the local currency, as cash withdrawals at ATMs are supported. The monthly settlement of the accrued amount also gives you a free overdraft facility.
Why banks issue credit cards with no annual fee
The reasons for issuing free credit cards are by no means self-serving for the banks. Numerous hidden fees can become a cost trap for free credit cards at first glance. Because the term “free of charge” refers in most cases to the omission of the annual fee.
- Cash withdrawals from ATMs at home and abroad often result in considerable costs for which the bank earns.
- A foreign currency fee may apply to withdrawals abroad.
- If the account is not sufficiently funded at the time of credit card settlement, the bank will punish it with high debit interest.
- The option of paying the credit card amount in installments is extremely lucrative for banks.
These arguments show the numerous advantages of issuing free credit cards by banks or other providers. The high disposition amount granted on the credit card is particularly lucrative for banks if you repay it in installments. This entices many credit card users to make purchases that they would never make if they paid in cash or were debited directly from their bank account.
Which credit card provider is recommended
The best known credit card providers are
- American Express (AmEx)
- Diners Club
The difference lies in the allocation system of the providers. Visa and Mastercard issue licenses to banks and they decide whether to pass the credit card on to their customers with or without an annual fee. The two credit card companies American Express and Diners Club are different. These cards are requested directly from one of the companies and issued to the applicant directly.
The quality of the credit cards depends on the conditions of the issuing bank. Visa and Mastercard are accepted worldwide. If you choose a card from both providers, you are well secured on all trips.
Finally, a little note about free credit cards and cards with a regular annual fee. Basically, credit cards with and without an annual fee differ only marginally. The differences show in additional services such as bonus or discount systems or in the annual fee included insurance. However, the free credit cards are gradually following suit.
Compare and resist tempting offers
Annual fee credit cards, as they were standard a few years ago, showed little variation in overall cost structure. The comparison of the different cards used to be relatively uncomplicated. Today the offer is so large that it is difficult to grasp all important criteria at a glance.
Nevertheless, a comparison is essential to make the right choice. Even if it is often difficult to resist the tempting offers that work with permanent exemption, seed capital and a lot of additional promises.
When choosing a free credit card, pay particular attention to the following points:
- Is the credit card permanently exempt from an annual fee?
- What are the costs of withdrawing cash at home and abroad?
- Are fees charged for payments outside the euro area?
- Amount of foreign currency fees.
- What is the debit interest rate if the current account is insufficiently covered?
- Obligation to use a current account of the issuing bank; if yes – under what conditions?
- Cost of a partner card
- Daily or monthly billing?
Of interest are offers that offer a permanently free credit card including an interest-bearing deposit account and a free current account with no minimum receipts. For frequent travelers who prefer to travel outside of Europe, the elimination of the foreign currency fee is important and the reimbursement of withdrawal fees at ATMs.
The ideal form of billing – exact to the day or monthly?
An important point is the time of settlement. Here, providers with daily billing differ from those with monthly billing. If payment is made on a daily basis, the current account is debited immediately. The advantage of this billing method is the continuous overview of the amount still available. An advantageous alternative to monthly billing, especially if the credit card is used frequently in the form of payments and cash withdrawals.
The monthly settlement of the credit card amount against the checking account can be compared to an interest-free overdraft facility and offers financial scope. Especially if you are often away on business, monthly billing is an important detail. If the credit card sales were cleared on a day-to-day basis, you would make an advance payment for the entire travel expenses up to the travel expense report and the transfer initiated by the employer.
Both forms of billing have their advantages and are only one criterion that makes a contribution to the decision of the suitable provider.