What are Credit Cards?

paying with a credit card

Most people think Credit Cards are just an easy option to pay if you’re short on cash. But many people have never been taught how to handle a credit card. Lewis Smith, who is the vice president of finance at Bayport Credit Union, said that Credit Cards are a teaching experience.

A credit card contains a magnetic strip on the back, with your account number, name, and expiration date on the front. And it allows you to use the bank’s money instead of your own to pay for items when you don’t have any more money in your account. But you will have to pay back the money plus interest.

But why do I need a Credit Card?

If you want to buy something from the internet, book a flight or reserve a hotel you need a Credit card. In Switzerland for example you can download the railway app, where you then can buy your ticket on the app with the Credit Card. It is just an easy way to pay. Using Credit cards to pay is always the easier option than paying in cash. You don’t have to look in your pocket for the right amount of cash and you don’t have to remember to bring enough cash when you leave the house. But you have to remember that often there are fees when you pay with credit cards. 

happy woman shops at home
Negative aspects of Credit Cards

But there are dangers if you have your own Credit Card. First of all, I put up a limit for mine, so I won’t ever be able to lend money from the bank. But if you lend money from the bank and you get an interest, then you are most likely to pay more in the end.

The bank makes money from Credit Cards from the transaction fees (money charged every time you use it), interest payments (when you don’t pay off your full debt), and fees (late payment).

So for example, if you want to buy a really expensive 1000.- bag and you lend that money from the bank, you might get an interest rate of 5%. In the end, you have to pay 1050.- . Maybe it’s better to save that money? If you’re struggling with saving money, here are some easy tips.

How I think about lending money at a young age: If you can’t afford it, don’t buy it.

Do you actually need that bag? Why not wait another year until you have saved all the money and can buy it with your own money?

person handing credit card

Another danger is, that you are likely to not know how much you are actually spending. Because we don’t get a sense of how much we are spending, we spend more money.

If your card gets stolen, the person can draw a lot of money at one time before you can cancel your card. That’s why it might be helpful to set up a limit.

What I use

I have a v-pay card and a credit card from Raiffeisen. With the v-pay card, you can pay contactless, up to 40.- without even typing in your pin. I can get cash and also check on the internet how much money I have on my card. I use this card daily and I can really recommend it to everybody. You can also use twint with that card.

The credit card, I don’t use a lot since you have to pay some fees for every purchase, but I have bought different items on the internet before. 

If you’re a student, ask your bank if they have a student credit card. There are often several benefits to a card like that. 

If you want a list of the positive and negative aspects of a credit card, here is another great blog post from NerdWallet.

Do you have a Credit Card? If yes, did you ever use it to Puy something you actually couldn’t afford?

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