Credit card: What are the advantages & disadvantages?

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The credit card is one of the most popular and widely used payment methods. The payment method is accepted both online and offline in local stores. What are the advantages of a credit card, and are there any disadvantages?

Many current accounts already include a credit card. Sometimes, it can be booked for a fee or for free (see free credit card at Consors). However, the payment method is not linked to a current account. This means you can also have a credit card from a provider other than your current account provider. The credit card has several advantages over other cash cards, such as the “EC” card (=Girocard) or the debit card. Credit cards also have advantages over online payment services such as PayPal. However, there are also some disadvantages.

Advantages of a credit card
This speaks in favor of the credit card:

  • Credit cards are accepted worldwide. Mastercard and Visa cards, in particular, can be used even in remote locations or on business trips.
  • You can use them to withdraw cash from almost anywhere in the world. Unlike with a debit card, no fees depend on the credit card provider, and you are not dependent on ATMs from certain providers. However, you should know that some ATM operators may charge general fees when withdrawing money.
  • Credit cards are required in many places to make payments. For example, many car rental companies or hotels only accept credit cards, which must be deposited.
  • You can use it to make contactless payments at checkouts.
  • Online payments can be made conveniently by entering the credit card number and the “CVV”. There is usually no need to remember passwords or anything similar.
  • With most payment methods, an invoice amount is collected immediately after payment. With “charge” credit cards, however, this happens with a time delay. So you can buy something today, but the money is only debited at the end of the month.
  • You will receive a credit from the provider depending on the type of credit card account. For example, if you don’t have an “overdraft facility” on your current account, you can use it to make more expensive purchases. The credit limit is normally determined according to your income when the credit card is issued and can be adjusted at a later date if necessary. Outstanding amounts must be paid at the end of a billing month.
  • Some credit card providers offer a bonus. For example, you can collect additional points with a Payback credit card and receive points even though a store does not participate in the Payback program. You could receive credit for Amazon orders with the now-discontinued Amazon credit card. Some providers also give you access to exclusive discounts. Applying for a new credit card is often rewarded with a bonus.
  • Some credit cards include additional services such as travel insurance.
  • There are also “prepaid” credit cards that can be topped up with a certain amount beforehand. This gives you better control over your spending and protects you from financial loss in the event of loss or theft.
  • If you have problems with providers, it is often easier to repay the amount paid by credit card than by bank transfer, for example.

There are also disadvantages
Despite all the advantages, credit cards can also bring problems and risks. These are the biggest disadvantages:

  • There is an increased risk of over-indebtedness. Due to the “buy now, pay later” principle, there is a risk of misjudging your finances and not considering later charges when planning.
  • Overdrawing your credit card account often results in high interest rates.
  • As easy as it is to pay with credit cards, the risk of fraud is just as high. Criminals are always trying to steal credit card details. The number and name can sometimes be purchased at someone else’s expense. In most cases, however, the security code on the back is also required. Nevertheless, you should always monitor your credit card account and check for suspicious debits. In the event of unknown payments, you should contact the bank immediately. You should only enter credit card details on sites that you trust. In particular, you should not enter any data for links in emails or unknown and suspiciously cheap stores.
  • Sometimes, online store databases containing customers’ credit card details are hacked. In the event of theft or at least suspicion or loss of the card, the bank should block the card.
  • Depending on the provider, monthly or annual fees may apply for providing a credit card.
  • Additional costs for foreign transactions such as cash withdrawals or payments in foreign currencies may be charged.
  • Although credit card payments are widespread, many places do not accept this payment method. Sometimes, card payments from certain providers, such as American Express, are impossible.
  • Unlike cash, credit cards rely on a technical infrastructure. So if there is a power or internet failure at the retailer, you cannot pay with it.
  • The classic credit card is not an anonymous payment method. Providers can conclude purchasing behavior and whereabouts during use.
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