The greatest risk lies in the payment requirements. While traditional charge cards debit the full monthly balance, many credit cards advertised online as “free” operate with “flexible repayment”. This model is known as a revolving credit card – and what revolves here is debt. At the end of the month, only a small portion of spending plus accrued interest is repaid; the remainder is carried forward as credit, often at annual interest rates of 20 to 25 per cent. Anyone who does not actively settle the full amount by bank transfer risks falling straight into a debt trap.

Low Spending Limits
Another issue with low-cost cards is their often modest spending limit. €3,000 may be sufficient in everyday life, but when travelling, hotels and car rental companies frequently block substantial amounts. What remains may quickly be insufficient for further payments. Some providers even reduce limits without warning – unfortunate if this happens overseas, where no alternative means of payment is available. 

Hidden Fees
Beware of supposedly “fee-free” cards. This often applies only to the first year; from the second year onwards, annual fees of well over €100 may apply. Ongoing charges can also be significant: foreign currency transactions often cost more than 2 per cent, cash withdrawals up to 4 per cent. One tip, at least: avoid unfavourable exchange rates by choosing to be charged in the local currency rather than euros. This ensures the usually better exchange rate of the card issuer rather than the costly rate set by the local bank. 

Insufficient Insurance Coverage
You can save yourself the surcharge for Gold or Platinum cards without any disadvantages. The much-vaunted “premium travel and car rental insurance” offers little real protection. Extensive exclusions, high deductibles and low coverage limits see to that. Coverage usually applies only to services paid for entirely with the card in question, and on single cards only to the cardholder. Woe betide you if you book for your spouse: even in the event of illness, cancellation costs will not be reimbursed. Cover is excluded anyway for hotels, flights or car rentals not paid for with the card, and it is typically “subsidiary” – meaning it only applies if no existing policy covers the loss (such as household insurance, which often already includes travel luggage).  

Better Play It Safe
Avoid bargain-basement online offers and opt instead for reputable providers with clear terms, transparent costs and reliable service. Credit cards are convenient tools – but supposed bargains usually bring nothing but frustration. When it comes to money matters on the road, the English proverb applies: “Better be safe than sorry”. 

P.S.: As equity investments, Mastercard and Visa are certainly worth a look. They earn money on every transaction they process and are major players in digital payments. That said, with price-to-earnings ratios of around 35 for Mastercard and 34 for Visa, these shares are not exactly good deals at present. Text: Judith Engst and Rolf Morrien