There are several types of credit cards. It is not just a question of whether the credit card is free of charge or which provider it is. The conditions themselves, for example credit limit or credit card billing, make the difference.
Real credit card – the credit card, also called RevolvingCard
With a real credit card (revolving card), the customer is given a plastic card with an embossed card number. The numbers on the card are stamped and not printed or lasered. However, the embossing has lost its importance in modern times because it is not processed in modern electronic payment. It dates back to when the so-called “Ritsch-Ratsch devices” were used for payments with credit cards.
In addition, the customer is granted a fixed credit line, provided that creditworthiness is available, which he can use flexibly at the ATM, when paying online, in shops or at petrol stations. Because of the credit line granted, the credit card also has the term “credit” in its name.
Payment target and partial payments possible
If the customer now makes sales with the credit card, the bank charges him, which usually happens monthly. The credit card holder therefore receives a payment target here, since sales are not charged directly to the checking account. When paying the credit card balance, the customer can choose whether to settle the total amount of the invoice or to pay it off in installments. If the credit card holder chooses the partial payment, the amount outstanding at the bank represents an installment loan and carries interest as such, but this entails additional fees for the customer.
The interest on a credit drawn on the credit card is significantly higher than the credit interest on a conventional installment loan. Installment loans usually have an effective annual interest rate of less than 7%, whereas the interest rate on credit cards can sometimes be 15 to 20% per year. A credit card should therefore always be used wisely and not for long-term financing.
A branch of the “real” credit card is the so-called charge card. In this variant, the customer also receives a highly embossed plastic card, but no credit line is agreed between him and the bank. The bank “collects” sales and debits them at the end of a billing period, usually one month, closed to the checking account.
Because the bank does not collect the open items in a sum until the end of a billing period, it grants the customer a specific payment term and in this way automatically grants him a short-term loan, which however does not earn interest. However, interest can accrue if the current account slips into the red after the credit card balance has been debited. In this case, interest would be charged on the overdraft facility or a tolerated overdraft, which can also be quite expensive.
Credit cards that are really not
In addition to the real and the charge credit card, the market offers other types of credit cards, but strictly speaking they should not bear the name because the most important features of a credit card are missing – the granting of credit and a payment term.
However, this does not change the fact that the “fake” credit cards can be used wherever the corresponding logos, such as MasterCard or VISA, can be found.
With a debit card, the customer receives a plastic card, but usually without embossing. In addition, the bank does not grant a term of payment or a credit line. The sales made via the debit credit card are immediately debited to the checking account and thus this variant of a credit card works like a conventional ec/Maestro card.
In contrast to the ec/Maestro card, the debit credit card can be used for payments on the Internet or abroad, for example in the USA. The debit card is therefore a useful addition if no value is placed on credit or payment terms.
Prepaid credit card
The term “prepaid” is already known from the mobile communications industry and roughly means “prepaid”. This is how the prepaid credit card works, which is usually issued in Germany without embossing. Before you can use them, a certain amount must be paid into the credit card account, which the holder can then dispose of. The prepaid credit card is therefore managed on a credit basis, without a credit line or payment target and is therefore not a real credit card. Card sales are immediately deducted from the balance.
Virtual credit card
As the name “virtual” credit card suggests, customers do not receive a plastic card that they can hold in their hands. The bank or credit institution only provides the credit card details (credit card number, validity period and verification number) that are required for payments. Since there is no card that can be inserted into a machine, this variant of the credit card is only suitable for payments on the Internet. Cashless payments or cash orders are therefore not possible.