Why the credit card is actually not a loan at all. The classic credit card, as it is known in Germany, is based on a system that is as simple as it is effective. Anyone who opts for a normal credit card receives a credit limit. The amount of this amount depends on several factors. These factors include, above all, the income of the credit card holder. How much is this Is it a safe income?
What about an employer contract?
On the basis of this information, the framework is determined. Everything is possible here, from 500 to several thousand dollars. This credit line applies for a fixed period. This period usually refers to one month. That means: Within a month, the credit card can be used to pay as much as is available. When the credit limit is used up, the credit card stops working. If the holder would then like to pay with the card, it will be shown when paying that no payment is currently possible with this card.
The credit limit naturally also serves to protect the bank but also the credit card holder. After all, the credit card is used to accumulate debts in a way that must then be paid. The debts can be paid at an interest-free payment date without additional costs.
Note: There are also banks that have weekly billing. The framework is billed here every week and the budget used must be paid. Before signing the credit card, you should ask how long the interest-free period is. There are also some providers who bill for several months without interest. However, these are rather rare. Most of the time is four weeks. For the user of the credit card, it is in the foreseeable future, which can be kept in view.
What is the interest-free payment term?
If you take out a loan, you are directly in debt. He pays not only for the loan amount but also for the interest. These are usually set for the period of the loan. There is no interest free payment period. It is different with the credit card. The availability limit can be used for four weeks or one month. After this time, a settlement is made and the customer has to pay back the amount used. No interest is added to this amount. It is therefore an interest-free payment term. It is different with credit cards, where the amount can also be repaid in installments. Only the first installment is free here. All additional installments are subject to interest.
What does the bank gain from providing a credit card if it doesn’t even take interest?
In the credit card system, the merchant or the provider who accepts a credit card has to pay fees. These fees go to the house bank. The bank therefore earns on the credit card whenever the user pays with it. The interest-free payment period is therefore an advantage for the credit card holder.
However, caution is advised if you opt for a credit card with billing every four weeks and then cannot pay. In this case, interest on arrears arises and, depending on the provider, these are anything but cheap. Some of them can be in the two-digit range. The debit interest rates are particularly high and are often compared to the cost of a credit facility. So if you know that you cannot pay the amount of the available amount within the interest-free payment period, you should better refrain from using the credit card and get a normal loan. Here, the interest is significantly lower than the debit interest on the credit card. A comparison of the providers in terms of interest rates can also be worthwhile.