The credit card is an American phenomenon that has spread to Europe. But is buying a credit card risky and pricey? We sorted it out.
Why purchase a credit card?
The credit card is known as an easy payment method that you can always use. The main reason people choose to purchase a credit card is for special foreign payments. This way you can easily place an order online, book a flight or pay in a restaurant when you are on vacation. Did you know that all purchases you make with a credit card are also insured for up to two years? Yet the credit card has a bad reputation with many people: a credit card would be dangerous and cost a lot of money. In this article we will explain how it works.
Purchase a credit card and the spending limit
A regular credit card works with a spending limit. In other words: how much money you can spend with your credit card. The level of the spending limit is income-dependent. The outstanding amount runs up in the month and you can then repay the amount in one go (often at the end of the month), after which you also immediately pay interest on the outstanding amount. Another possibility is to repay the outstanding amount early and thus avoid the interest costs. This often pays off because the interest costs of a credit card can often be as high as 15%.
Which credit card to purchase?
What is a good choice when you want to purchase a credit card? There are various credit card providers that apply their own rates and conditions. Also always check whether you can request a credit card without obligation, or whether there is a (annual) contract. Furthermore, check the transaction costs, the costs of the exchange rate and the costs of withdrawing money (abroad). In addition, you always pay an amount for owning a credit card. Prices can vary considerably in this area.
Purchase a credit card and have money problems
It is very important not to be tempted to make purchases with your credit card and spend money that you do not have. After all, you always have to pay it back at the end of the month, including interest and extra costs. If you know that you spend money easily, it can be useful to set a lower credit card limit for yourself and thus avoid high costs.
Purchase a prepaid credit card: how does that work?
If you want the benefits but not the burden of the credit card, it is worth buying a prepaid credit card. A prepaid credit card is a credit card on balance: you can never spend more than you have and, in addition to the annual contribution for this card, you do not have to pay any extra costs. This makes the prepaid credit card a safe alternative. The prepaid credit card can also be used worldwide and is accepted everywhere. It is also possible to request a prepaid credit card if you have a negative broker registration. You can easily recharge the card yourself,
In short, with a credit card it is important that you keep an overview yourself, not just spend too much money and make well-considered choices. This way you can take advantage of the many benefits that (prepaid) credit cards have to offer!