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I have a bank account, with some savings. Enough to cover every expense I could have to face without delay.

I also have a debit card, which I use for my offline payments, a Paypal account for most of my online transactions, and a prepaid card in case of need for everything else.

I have no debt at the moment and I won't, for the foreseeable future, make any.

What advantages I would get from opening a credit card? What disadvantages?

At the moment, I value more knowing I don't owe money to anybody than knowing I am able to delay the actual payment to the next month.

bracco23
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    is the debit card from Visa or Mastercard? Or from your bank? – lalala Feb 04 '20 at 12:57
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    @lalala at the moment I have a debit card from my bank with Mastercard circuit enabled. CC would most probably be another Mastercard still from my bank. Prepaid are actually two, both Mastercard, from my main bank and the other from another bank. – bracco23 Feb 04 '20 at 13:00
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    When you use your debit card, are there transaction fees? I believe there are with PayPal. – Dan Bracuk Feb 04 '20 at 15:03
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    @DanBracuk Until now I've never encountered an e-commerce site where I had to pay a transaction fee, paypal or not. I had to pay some for particular services like italian taxes and such, but on Amazon, Ryanair, and many other no fee at all. – bracco23 Feb 04 '20 at 16:21
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    @DanBracuk Also for offline transactions, my debit doesn't add fees to in-currency transactions. With different currencies, there is a small fee. – bracco23 Feb 04 '20 at 16:22
  • In that case, I have nothing to add to the answers you already have. – Dan Bracuk Feb 04 '20 at 17:28
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    Not enough for a full answer, but I found that when travelling, having a credit card on you is generally desirable. EC-Card usually has a fee when used outside the home country, and many hotels only accept credit cards to begin with. Same with car leasing companies. In addition, when trying to use e.g. a vending machine or ticket machine, I generally prefer having more options because not every card is accepted everywhere. This is worth 20 bucks a year to me. – Mookuh Feb 04 '20 at 20:11
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    I was in similar situation like you before. Only reason I started using a CC was just to build my credit score. I don't need to loan money, but it will be very helpful if I ever need some money. Similarly having a large overdraft limit helped me in quitting my job once (it gave me confidence that I can survive without a job for longer if needed). –  Feb 05 '20 at 14:56
  • Platinum CCs come with priority passes ... – Hagen von Eitzen Feb 06 '20 at 06:24

12 Answers12

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For me, the overriding Pro is that the money doesn't leave my bank account until I want it to.

For example, my daughter was in school in China, and needed to quickly buy a ticket home, which she did. But the flight was cancelled even though the charge posted to the card. If this was a debit card, the money would be gone until the airline decided to refund the money. On a credit card, I just let it sit there, and only pay for the new flight (at double the cost, and flying the opposite way around the globe) that she purchased.

Similarly, in case of fraud, the money is out of your account until the bank refunds it. Not so with a credit card.

Rewards is a distant second reason to get one.

RonJohn
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    Like, I can see how not having a continuous flow of money out of the bank can benefit you from in cases where the money goes out and in, but I still think the burden of refunding the money timely and effectively is not on you, but on the other party. I see how a cc would make handling everything in this situation easier, but still it is not an excuse for banks or airlines to not refund as quickly as they can. – bracco23 Feb 03 '20 at 14:49
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    @bracco23 are you sure that -- for example -- needing three days to return €500 isn't as fast as their processes allow money to be returned? – RonJohn Feb 03 '20 at 15:22
  • Comments are not for extended discussion; this conversation has been moved to chat. – GS - Apologise to Monica Feb 05 '20 at 23:55
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The main advantages and cons have already been mentioned in other answers, and so I won't repeat them, but let me touch on a few other lesser advantages of credit cards.

Credit cards protect against theft

If someone steals your credit card from you it's a nuisance, but only a nuisance. Credit card companies won't charge you for fraudulent purchases made on your card. By contrast if someone steals cash from you you're out of luck, and even a stolen debit card or check book can often leave you liable for any purchases made by the person that stole from you.

Credit cards protect you against bad businesses

If a company charges you for an item or service and doesn't deliver on what they promised you have little options if you pay with cash. While there are technically always legal options to seek compensation, in practice it's not worth the effort or cost to try to seek legal action against a company if they didn't ship your 50 dollar video game to you as promised; it's just easier to write off the money as a loss.

However, with credit cards you have a simple option, just tell your credit card company that you were cheated and they will give you the money back! Effectively they will refuse to actually pay the company you made the purchase from if they believe you have a legitimate claim that the company did not deliver what they had promised you. It helps that credit card companies give you the benefit of the doubt on such claims; for low-cost items they often take your word that the company did not properly deliver on your agreement without asking for any significant proof. I've only used this feature twice in my life, but it's still nice to know you have options if someone tries to cheat you when you buy with a credit card!

Credit cards are convenient

Paying with cash is slower than credit and requires you to carry around cash, or worse coins (which I refuse to ever deal with nowadays). Credit cards are just a more convenient way to make a purchase in most cases. Sure, a debit card can duplicate most of this convenience, but even with debit cards you usually need to enter a pin where for small purchases you can just swipe a credit card and go.

Credit cards can help you to keep track of your expenses

If you regularly pay everything with a credit card then each month you get a nice report of everywhere you spent money, and most credit card companies will even give useful tools for visualizing how that money was spent. This can be useful for tracking how you're spending money, determining if you're spending too much or what the biggest expenditures are etc; making it easier to generate and follow a budget. Though admittedly debit cards offer similar features.

The net result is that a credit card, when used right, is a significant improvement over other forms of payment. It's fast and easy while helping you to develop positive credit and giving you added protection and cash back (or other rewards) on the purchases. I've made hundreds of dollars just by using my credit card to make payments and taking the cash back.

Should you get a credit card?

The short answer to your question is that if you trust yourself to reliably pay your credit card off in full every month, and not increase your spending because you have a credit card, you absolutely should have a credit card. It provides a multitude of advantages over other methods of paying, and no negatives if used wisely. I try to pay everything with my credit card, to the point I'm annoyed when I am ever forced to use another form of payment!

Having said that, if you don't use a credit card responsibly, including paying it off in full every month, it can be very costly to have, as the interest charges and assorted fees add up very quickly! Credit cards can also increase the temptation of buying something you don't really need, or can't really afford to purchase at the moment, due to how convenient they are and how easy it is to swipe a card without thinking about how much something actually costs. A shockingly large number of individuals struggle with using credit cards responsibly; I have many good friends who have told me they will never get a credit card again because they have seen that they can't use one responsiblly.

If you have any doubt about your ability to use a credit card responsibly I would suggest erring on the side of not having a card and not risking temptation, as the harm of misusing a credit card is far larger than the rewards for responsibly using one. However, if you're confident in your own financial responsibility and ability to pay your bill in full at the end of every month then I strongly encourage you to get one as soon as possible and start reaping the many advantages!

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dsollen
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    This also seems to be a US-specific answer. While the factors listed here apply in US (and IMHO UK as well) with a significant legal difference between debit and credit cards, in most continental Europe these factors are not advantages of credit cards, because (a) theft protection (b) protection from bad merchants (c) convenience (d) report of expenditures would be literally the same for a debit card; in essence, paying is exactly the same, but the only practial difference being terms and conditions of the loan attached on the card. – Peteris Feb 03 '20 at 22:47
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    @Peteris There is a big practical difference in the UK, even though there is debit card fraud protection. If you have to contest a transaction of a debit card, you have already lost the money from your bank account, and you can't spend it on anything else until you get it back. With a credit card, you simply owe the card company money, and provided the problem is resolved within the card account period (at least 4 weeks after the disputed transaction) you never pay out any of your own money, because that debt will be cancelled. – alephzero Feb 04 '20 at 00:02
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    In the UK the protection against bad business is an advantage of a credit card over a debit card. As which says "Section 75 of the Consumer Credit Act applies only to credit cards and not to debit cards " https://www.which.co.uk/consumer-rights/advice/can-i-claim-on-my-credit-card-when-something-goes-wrong – bdsl Feb 04 '20 at 00:25
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    @Peteris Are you *sure?. In principle, the US system could say the same thing about being literally the same... if you completly ignore cash flow. You have the same dispute rights, same chance of prevailing in a dispute, same reportage, etc. etc. However. During the dispute you will be left with a cash flow problem, as discussed. Are you quite sure that Euro banks will put the disputed money back into your account during the dispute?* – Harper - Reinstate Monica Feb 04 '20 at 02:47
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    @Harper-ReinstateMonica no, I'm saying that this requirement to put the disputed money back into your account immediately is not an inherent property of credit cards as such, these are specific rights granted by specific local laws only in USA, UK, and some other places. In EU there's the generic Payment Service Directive dispute process, which requires the money to be put back immediately in certain types of dispute but not in others, and applies identically to credit and debit cards; and there's the Visa or MasterCard chargeback process which also does not implement any major difference. – Peteris Feb 04 '20 at 04:16
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    Add to this in the UK (only?): the credit card company is jointly liable with the supplier for any purchase between £100 and £30,000 even if you just put a deposit on the card. If you can't take action against the supplier (typically because they have declared bankrupcy) you can take action against the card company. Especially useful for booking hotels and flights. The card company will be liable for a replacement flight (which may cost more) if the airline fails, though not if the flight is altered or cancelled under the original Ts&Cs you accepted. – nigel222 Feb 04 '20 at 10:30
  • It was my understanding that Visa requires the bank give me the same rights on a card bearing their name whether debit or credit. – WGroleau Feb 04 '20 at 16:03
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    @Harper-ReinstateMonica "Are you quite sure that Euro banks will put the disputed money back into your account during the dispute?". Someone that has a cash flow problem over a single payment of the type usually done with a credit card (so no cars or houses) is arguably the very last person that should own a credit card Giving that person thousands in credit at a double digit interest rates is almost criminal. – Douwe Feb 04 '20 at 17:41
  • @Douwe and my thought is, why the heck would you leave cash lying around in a checking account? Put what you need in to pay the bills and get the rest of your money out there working for you, – Harper - Reinstate Monica Feb 04 '20 at 21:07
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    @Peteris The fact which you are stating is a correct one; I respect that. However in your haste to state it, you overlook the fundamental difference of credit vs debit. The rules may be the same but the outcome for the user is very different: In one case the user loses a little credit limit. In the other case they lose the cash, and must now contend with a cash-flow issue not of their making. – Harper - Reinstate Monica Feb 04 '20 at 21:27
  • "even with debit cards you usually need to enter a pin", uhh, no? The exact figure varies by country, but no PIN is required for purchases below a certain amount. $100 in Australia. – Jim Cullen Feb 05 '20 at 00:00
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    @JimCullen At least in Italy, whatever the amount of the transaction if you pay using the chip you must enter a pin. A lower limit, like 25-30€, exist for contactless transactions under which you don't need a PIN, but not if you use the chip. Never used the magstrip, do they even still work? – bracco23 Feb 05 '20 at 08:51
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    Swiping for small amounts is perfectly possible with debit cards already (at least in Europe and Asia and that's only where I know it to work), same as getting an overview of your spending. – Sebastiaan van den Broek Feb 05 '20 at 12:06
  • @Harper-ReinstateMonica I feel your statement is a too absolute. I admit I would generally be cautious of someone without an emergency fund using a credit card, as it's tempting to abuse one, the lack of emergency fund makes it hard to fix the issue if it is abused, and the lack of an emergency fund may indicate someone who is not wise with money anyways. However, it is possible to use a credit card wisely to earn money on cash back without an emergency fund if you only buy things you would have bought with debit and immediately pay it of. It's rare it's a good idea, but not impossible. – dsollen Feb 05 '20 at 14:49
  • Often overlooked: even if your debit card has zero liability and the bank repays you in case of fraud, there is still a non-zero time period where you are out the money. Any overdraft charges, late fees, etc incurred during that period will not be refunded, so you can still indirectly lose quite a bit of money due to fraud. – bta Feb 05 '20 at 17:24
  • @bta actually in somewhat similar circumstances my credit card company was willing to also waive any fees that resulted from a bogus charge. You may have to know to ask for them to waive the fee, they never preemptively offer to remove charges if you don't care enough to ask; but I suspect most will remove them if asked. – dsollen Feb 05 '20 at 17:51
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    @dsollen cash back is not exclusive to credit cards though. Usually it applies just the same to the debit cards. Basically, outside of US and a few other places, it seems the only difference between the debit card and the credit card is that debit card has 0 loan limit. That's all. IRC, it's even implemented the same in some places. – Dan M. Feb 06 '20 at 12:31
  • @DanM. I do know of debit cards that offer some cash back. However, having researched cards credit cards almost always offer better cash back deals then debit cards. I don't know why, I would have expected equal cash back, but for whatever reason credit cards definitely offered better rewards. Perhaps people came to associate credit cards with cash back so much that it's a larger decision in their choices then debit cards are, or because your debit card is usually decided by your bank? – dsollen Feb 06 '20 at 14:52
  • Credit cards are convenient in Europe there's no difference in this. You can "tap and go" with both a debit or credit card. Simply tap the device with the card and you've paid. In the UK this is called contactless payments. And if the cards don't have the NFC capability, then it's still the same - you'll have to stick in a debit card and enter a PIN, or you'll have to stick in a credit card and enter a PIN. Identical. – kiradotee Feb 06 '20 at 14:56
  • @dsollen - I'm referring to fees by third parties, like your landlord or the phone company, when you can't pay on time due to waiting for bank reimbursement. – bta Feb 06 '20 at 20:43
  • @bta: at least in Germany, if you pay by debit card + signature, you can cancel that transaction online and the money is immediately back in your account. Canceling stuff paid by debit card + PIN takes longer, but so does canceling a transaction on the credit card (I had that once so far, and it took a couple of weeks including me sending in proof why the transaction should be canceled). – cbeleites unhappy with SX Feb 06 '20 at 22:54
  • @Harper-ReinstateMonica: I don't get your argument about the cash flow: A and B both have 500 on their checking account and a credit limit also of 500 (otherwise no choice in card). A pays 480 by debit card. Result: they can still access 520: 20 via debit card, 500 via credit card, A still owns 20 - 0 = 20. B pays by credit card. they can still access 520: 500 via debit card, 20 via credit card. B still owns 500 - 480 = 20. Where is the difference? (BTW, the European version is 500 credit line on the checking account and thus also accessible via debit card rather than having a credit card) – cbeleites unhappy with SX Feb 06 '20 at 23:04
  • @cbeleitessupportsMonica - A non-zero amount of time passes between the fraudulent transaction and you noticing and canceling it. During this window, you can have checks bounce, auto-drafts fail, etc without any warning, generating penalties and fees that vendors are unlikely to refund. – bta Feb 06 '20 at 23:13
  • @cbeleites I explained it, but someone deleted it. This incorrectly assumes credit limit is equivalent to cash in bank, infinite fungibility between the two, omniscience, and no serious problems resolving disputes. Credit limit is not money, and can't be spent except on retail purchases. So using cash where you are able to use credit is forecloses your options to spend the $480 bank cash on something else, e.g. Emergencies. These concerns are practical, not fiscal, and are the very reason corporations have "cash flow statements" in addition to "balance sheets". – Harper - Reinstate Monica Feb 07 '20 at 00:00
  • @bta: If a fraudulent transaction comes in, I can usually not choose which account is defrauded, can I? Also, what's the difference between a transaction bouncing on the checking account vs. a transaction bouncing because you hit your credit limit? I may add that here in Europe/Germany, credit cards in the US sense of the word are comparably uncommon, but the checking account typically has an automatic overdraft credit. From what I gather (so no firsthand knowledge), for both this overdraft limit and proper credit card limit 2 month's net wages are a common size. – cbeleites unhappy with SX Feb 07 '20 at 00:04
  • @Harper-ReinstateMonica: we may have found another cultural difference between Europe [or Germany] and the US here: I can withdraw cash money from my credit card account (with that particular bank even without fees). I'm not sure whether I can push more than the positive balance from that account to the connected checking account, but ultimately I could withdraw cash from the credit card subaccount and pay/wire that to the checking account. This may take a day, but even if I usually have my overdraft limit/reserve line of credit set to zero, a small increase can be asked online and should... – cbeleites unhappy with SX Feb 07 '20 at 00:06
  • ... be processed automatically. So it may very well be that my possible cash flow in Germany is far less affected by deciding A vs. B than your possible cash flow in the US. Thanks for the explanation! – cbeleites unhappy with SX Feb 07 '20 at 00:09
  • @cbeleites interesting about Europe. I attribute the difference more to my knowledge of accounting. Those two options are totally different on a cash flow statement. Having no cash reserve making my skin crawl, however, sure, that's American. – Harper - Reinstate Monica Feb 07 '20 at 00:13
  • @Harper-ReinstateMonica: Aha. I do have an additional vocabulary question: I wrote "possible cash flow" because I don't know the proper English term: the German term is Liquiditätsreserve meaning the amount of liquid assets plus those assets that can easily be converted into liquid assets plus unused but approved/existing credit lines. I read cash reserve as not containing available unused credit lines? Being German, no cash reserve does make my skin crawl as well, but so do revolving consumer credits. And of course we do Liquiditätsplanung here as well - but then again, our Kreditkarten... – cbeleites unhappy with SX Feb 07 '20 at 00:34
  • @cbeleites Interesting, yes, I would call that "cash and available credit". I do not count available credit as cash available to me. Cash is mine; credit can be turned off against my will at any moment. Oh, and to bta's point, I choose (well, greatly influence) which account is being defrauded by not using a debit card at all. That's an InfoSec choice widely advised in the U.S. – Harper - Reinstate Monica Feb 07 '20 at 00:39
  • ... are typically charge cards, so the amount of time they give is on average less than a typical invoice. – cbeleites unhappy with SX Feb 07 '20 at 00:41
  • Let us continue this discussion in chat. – cbeleites unhappy with SX Feb 07 '20 at 00:41
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Pros:

  • A CC can be very convenient when travelling, especially to the US or other "credit card countries".
  • A CC can be the only way to pay online for certain services, mainly from companies outside the EU.
  • Your purchase might be better insured using your CC. (But chances are your bank or personal insurance already covers you, check first).

Cons:

  • Small businesses in Europe might not accept your CC or resent you for using it because of the fees.
  • The interest rates are ridiculous, if you need to borrow money do it any other way . CC debt is actually worse than overdrawing your account, which would be the typical European definition of "stupid debt".

And remember:

  • Credit history is not a thing in Europe. Having a high credit limit is actually a negative when you apply for a mortgage or something like that. They treat it like potential debt (or in some cases as actual debt).
  • Ease of use is reversed in Germany (or the Netherlands, or Austria etc). You are the exception paying with CC and a lot of the times it's a hassle, with waiters and cashiers being unfamiliar with your (specific) CC and the like.
  • Always, always pay off CC debt immediately, before the interest sets in, see bullet 2 of cons.

A friend of mine once said this about owning a CC in Europe: "If you can afford it you don't need it, and if you need it you can't afford it". I think that sums it up nicely. I use mine for the first two mentioned pro's, and nothing else.

Douwe
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  • In seventeen European countries (and thirteen others), no one has ever shown any sign of resistance or confusion when I presented my US card. That includes Netherlands, Germany, and Austria. But I have (rarely but not never) had a debit card refused. – WGroleau Feb 04 '20 at 16:21
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    @WGroleau In 30 years of working with European retailers I've never encountered a single entrepreneur that was enthusiastic about credit cards. Most shrug, some are actively hostile. I've seen my Dutch buddy who insists on using his credit card on holiday in Austria and Germany ("cause that's why I own it") holding up queues on multiple occasions because of the hassle. Nobody bats an eye when an American uses a credit card, but with locals they will bluntly ask you if you can't pay cash or debit card. All other methods don't carry charges here, just CC with over 3%. So yeah, they resent you. – Douwe Feb 04 '20 at 16:42
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    For Germany I can even add that in business founder courses they tell you to think hard whether you want to offer credit card payments as a retailer. – cbeleites unhappy with SX Feb 04 '20 at 16:47
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    OK, maybe they resent me. Or maybe they’re confused. They never show it. And if they are renting cars, often they refuse the debit card. – WGroleau Feb 04 '20 at 16:48
  • @cbeleitessupportsMonica I guess when you run a business with an average 5% gross margin (like supermarkets or gas stations), that 3% charge is a bit much... – Douwe Feb 04 '20 at 17:02
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    @Douwe: exactly. Though I just got reminded that these numbers are outdated and there's an EU regulation now that caps the credit card fee for the seller to 0.3 %, and apparently that's one of the factors that has since lead to an increase in credit card accepance (by the sellers) in Germany. – cbeleites unhappy with SX Feb 04 '20 at 18:39
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    @WGrouleau It also depends on the kind of business. Credit cards being accepted in a supermarket are rare in NL, while debit cards are the default option. Nowadays most supermarkets even have lanes where you can only pay with a debit card (no cash). – Emil Bode Feb 04 '20 at 20:16
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    @cbeleitessupportsMonica The cap only applies to the interchange fees received by the card issuer. Payment processors also take their own fees. In Finland, the standard fees for high-volume businesses are currently 0.41% for debit cards and 0.91% for credit cards, plus a fixed monthly fee. Processors such as iZettle targeting low-volume businesses may take up to 1.95% for all card types. – Jouni Feb 04 '20 at 22:15
  • Could you explain why a "small business in Europe" may accept a Debit Card but not a Credit Card ? I thought that as long as they accept VISA/MasterCard/Whatever they will accept DC or CC of that network indifferently. I've seen a lot of small business in western europe that do not accept card at all but fail to encounter one that do accept DC but not CC. – zakinster Feb 05 '20 at 08:56
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    @zakinster The word "debit card" is misleading. These are cards issued by your bank directly, not by a CC company like Visa or Amex. Everyone that has a bank account has one, there are no fees, they are universally accepted and so, except for a few fringe cases as shown above, make CC's totally redundant in Europe. Add in the fees and you can see why CC's are, shall we say, "frowned upon" by lots of Europeans. – Douwe Feb 05 '20 at 09:11
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    @WGroleau Car rentals and and hotels are the two big exceptions. They tend to like credit cards. If after you left, they find out that you broke something or raided the minibar and forgot to tell them, they can simply put the charge on the credit-card. Same, if you have a reservation and don't show up. With other methods of payment, they would have to rely on your cooperation instead, or if that is to much of a risk, annoy you by asking for a deposit. But for basically any other place, the costs outweigh the benefits, so they often only accept them grudingly. – mlk Feb 05 '20 at 15:33
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    Pro #2 forced me to get a CC (which I since then never used again). I had to create a Google cloud and AWS cloud account, and both can only be created with a CC if you aren't a company. For everything else, you really don't need a CC in Germany. –  Feb 06 '20 at 10:51
  • Not sure it's changed, but a credit card was also helpful in paying for things online from other countries in the EU as some countries had country-specific payment systems around their debit cards. – Eric Feb 06 '20 at 17:28
  • @Eric The different payment systems exist to this day, however payment providers like Adyen are commonplace now, they bridge that gap by offering virtually every payment option under the sun. – Douwe Feb 06 '20 at 17:34
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In the EU the main difference is that "some" debit card are debits. They can't be used for online payments.

For the EU - "credit history" don't exist. Some countries have private companies that gather info about "bad credit" and that's all. Some countries have general database of financial commitments that "credit lender" can check and counter with declared (or factual) earnings. Due to legislation in EU if you are in bad spot and you are given credit above your income the lender could be at fault (don't mistake lender as banks or credit card companies with usury ones).

For the EU:
PROS - when "impulse" buying you don't pay with your own money so there is no money taken from your account. I personally had a few "over estimation" (when paid with debit and returned he item) when I assumed I should have had more money in the account, paid for something and get overdraft.
Most, if not all, credit cards have grace period. So if you are savvy enough you can pay with CC while still having money in the account scoring extra saving.

Cons - said grace period. It's not counted from a payment date but "some" date. So with 30 day grace period you might not have 30 days but 20 or 17. Again, something I fallen victim too, learned how to milk the system. Realized it take too much time and attention than it's worth.
Charges and fees -some CC have hefty ones if you don't fill the requirments. Or if you don't apply to have them lifted. As an avid e-payment user I rarely use even my debit card so I would need to force myself to pay using CC to get away with required uses per month. Again, I would need to find a reason to use my CC to have a reason to have that CC in the first place.

If you have savings and can pay, what's called, urgent large spending (like new fridge or washing machine) without a problem then CC is not for you. You don't need it.

If you have a large purchase in mind (like a car or something, dozens of thousands money worth) and you have those saving in a time sensitive investment (like bonds) then apply for CC, use the grace period and earn money by having more income from investment than what you spend on paying off the CC.

SZCZERZO KŁY
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  • Credit history might well exist depending on your country. Also, credit utilisation is often a marker used. If you have zero credit available, you're using 100% of it. By contrast, if you have a £10,000 credit limit and are using £1000, you're only using 10% of your available credit. How a lender will interpret that may vary from country to country, but certainly in the UK I've found that my credit score has dropped after closing an unused card, because by decreasing the credit available to me, I increased my overall utilisation. – timbstoke Feb 07 '20 at 10:15
  • We have a "credit score". A private company that make it based on available data from various sources. No bank care about that. They check what credits you already have (from data shared by all banks). counter it with expenses, income and then decide. My bank for example ignore that I have applied for a 10K "credit" to my account. Again, it's a lender will or whim how they interpret data, from where they will pull it and if it will be all available data. – SZCZERZO KŁY Feb 07 '20 at 10:54
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One of the reasons I don't see listed here is that for certain types of transactions you may need to reserve a large amount of safety deposit, which is convenient with credit card and might be difficult or impossible with debit.

I was in the situation recently when I tried to rent a car for my vacation in UK. The calculated safety deposit the car company wanted to reserve was about twice my current account balance. I would have had either to borrow/transfer that money from other accounts and freeze it, or, if I had a credit card, I could have that money reserved and later returned, possibly not even paying the bank any fees if the reservation period was short enough.

Gnudiff
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    I'd be surprised if any car rental company would rent you a car without you giving them a credit card. They need this so they can charge you the insurance excess in the event you damage the car. This can typically be over $1000 - so it would be a lot of cash to deposit. – Oscar Bravo Feb 04 '20 at 08:40
  • @OscarBravo exactly. Although I remember renting a car in Malta a couple years ago, which I did without a credit card, and with a pretty small deposit (think couple hundred €), so UK was my first case where I was expected to have a cc and couldn't do without. – Gnudiff Feb 04 '20 at 09:12
  • same experience for me last year, rented 3 cars in Malta from a not so small company. Paid cash and they took the deposit from my debit card for all three cars. When the rent was over, couple of days later the deposit was back (minus the fine lol) – bracco23 Feb 04 '20 at 10:04
  • @bracco23 I guess parts of EU which don't have strong cc penetration are better for such things. I remember a number of shops (like small groceries (part of some chain nevertheless)) in Hague center which didn't take major cc's, but did take some kind of debits. – Gnudiff Feb 04 '20 at 11:14
  • I made the experience that for hotel reservations or car rental you need a credit card. You can't rent anything without a credit card. – testing Feb 04 '20 at 11:45
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    @Gnudiff that's because CC companies charge insane percentages to small businesses in the Netherlands. Good look selling an item with 5% margin if the CC company charges 3% for the payment. Even if they do accept CC they resent you for using it and might even charge an additional fee, can't really blame them. – Douwe Feb 04 '20 at 13:35
  • @Douwe Part of the T&C for a merchant taking credit card payments is that they are not allowed to surcharge the buyer (because it creates a barrier to CC use). If they do, and the CC company finds out, they will lose their merchant status and be barred in future. The CC company would argue that the 5% margin is more than made up for in increased sales. – Oscar Bravo Feb 04 '20 at 14:39
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    @OscarBravo From a retailers perspective, that only makes sense if there are indeed increased sales. In the Netherlands people have (preferred) alternatives for CC so those increased sales will never materialize. When you work with razor thin margins (like a lot of retailers do) a CC payment simply means: This customer bought my product, but Visa takes all the profit. Raising prices to account for the charges will price you out of the market, so what left is to either not accept CC or eat your losses. That's where the resentment comes in. – Douwe Feb 04 '20 at 14:54
  • @Douwe I understand their resentment - but they are resenting having to pay a fee in order to make it easy for their customers to buy from them. As you say, they have a simple solution: don't accept credit cards. But then they lose trade. It's free enterprise - nobody is forcing them to accept credit cards. – Oscar Bravo Feb 04 '20 at 15:14
  • @OscarBravo True, that's why there is no "strong cc penetration" in the Netherlands. The "debit cards" (a term I have seen used in pejorative fashion in the US, but carry none of that stigma in the Netherlands) are in fact more convenient to use. CC's are only easier for (some) tourists, that's why tourist places, hotels etc will universally accept them. Outside of those places, ymmv. – Douwe Feb 04 '20 at 15:32
  • It isn’t true that you “can’t rent anything without a credit card.” But it does limit which companies will allow it. – WGroleau Feb 04 '20 at 16:10
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    @Douwe: Germany has the same situation as the NL in that respect. – cbeleites unhappy with SX Feb 04 '20 at 16:45
  • @WGroleau: I didn't check every hotel or car rent company, but where I booked they all needed a CC. I think it's because they get the money for sure if you don't take your hotel/car. Also as others mentioned car rentals take this as an insurance if you crash the car. But of course there can be some exceptions and I don't know if they are rare or not. – testing Feb 04 '20 at 18:24
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    @testing It's really country specific. Last time I rented a car in Germany, which admittedly was 10 or so years ago, I did the deposit with my normal debit card. All my hotel bookings were also exclusively with debit cards or online with direct debit. It is probably different in other countries since Germany has a strong history of debit cards while CCs are the newcomers on the market, mostly due to the US dominated internet often forcing people to use US payment methods instead of local preferences. The OP should probably not ask "for a european", but for a specific country. –  Feb 06 '20 at 11:11
  • @Morfildur: Yeah, european is too broad. But last time (a few months ago) I needed a CC for a car rental in Frankfurt. And I couldn't use the companys CC. I had to use my own CC (for whatever reason). – testing Feb 06 '20 at 11:18
  • @Morfildur True, but the point still stands, that when you deposit with credit card, you don't need to have the actual money on your account beforehand, as you usually have to with debit. If the deposit is several thousand, it might become inconvienient to tie your money up. – Gnudiff Jun 19 '20 at 10:16
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Rental cars

In Germany, the only reason I ever use a credit card is to rent a car. Rental cars almost always require credit cards (I've rented cars in Iceland, Sweden, Germany, France, Spain, United States, and Canada). There is no other transaction I ever make for which I need a credit card, and indeed I almost never use a credit card for any other purpose.

In the past, I lived in Canada or the UK, where I had a credit card in order to "build my credit score". In Europe we're not so silly.

gerrit
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My view on credit cards (from Germany) mostly aligns with Douwe's answer.

Here are some additional points:

additional pros

(I don't see any additional pros, but I may say that the "convenient in foreign countries" may also have the flavor that withdrawing foreign currency cash via credit card can be the cheapest option to pay in non-EURO countries.
I have a credit card for exactly the reasons Douwe lists)

additional cons

  • Many banks charge annual fees for credit card, but not for the normal debit cards that you automatically get with the checking account. Taken together with the limited usability of CCs in Germany, that's IMHO not worth while unless there are other reasons to have a CC.
    If you decide for one, it does make sense to shop for a CC that you can get without paying extra fees, and maybe even open another bank account just to get that card.

Additional thoughts

  • Within what is called Kreditkarte in German, there is a whole range of mixes between the (US) concepts of credit, charge and debit cards. For the convenience in foreign (CC) countries, the important caracteristic is that for the seller it behaves like a credit card (not debit or prepaid). Whether the relationship between card holder and bank (card issuer) is actually more like credit, charge, debit or prepaid card doesn't matter in that respect and here in Germany these two aspects are only lightly coupled.

    E.g. There are credit cards that from the outside behave like a credit card but their internal operation mixes properties of credit, debit and ca: e.g. I put money onto my credit card like I'd do with a debit card. Any charges that take up more than the money I put there on bill date will also be automatically be withdrawn from the checking account the card is attached to (like charge card - so no credit card interest, but overdraft interest [Dispo/Überziehungszinsen]). Nevertheless, it also has a proper credit (incl. known pre-set limit).

    • This will also raise the available credit that the retailer/car rental/... sees, and this allows me to easily adjust "credit limit".
    • In the same (or opposite) way, the possible loss in case of stolen/... card (+ dispute of responsibility) can also be adjusted.
    • with this, the credit time by credit card is on average 1/2 month, whereas the payment period for invoices is usually 30 days.

  • IMHO, if you need that half month grace period for paying, you probably shouldn't buy anyways. (For readers from other parts of the world, health care and similar emergency services for humans here work without paying upfront)

  • When discussing the ease of reversing a credit card transaction, over here it is important to state compared to what other mode of payment.

    • It's much easier to reverse a wrong credit card transaction than a wrong wire transfer (Überweisung).
    • But returning a direct debit is even more easy.

  • Possibility to withdraw cash varies by bank: for some the bank (debit) card is better, for others the credit card.

cbeleites unhappy with SX
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Here is my answer to the question that may prove unpopular:

Pros

  • You can actually get some decent rewards by following the spending habits that your card direct you towards. For example there might be more rewards for spending at restaurants. Some card rewards are more valuable than others and while they are nice they are unlikely to make a material difference in your wealth/happiness.

  • The float between when you purchase and when you have to pay for the items can be valuable. For example consider an online seller that purchases items at retail that he thinks he can sell online for a profit. If he buys the items and they don't sell right away, he could return those items without ever paying for them.

  • There can be other perks offered, by the card, that is widely dependent upon your behavior. For example some cards offer free rental car insurance, while others offer no foreign exchange fees.

The bottom line is that there are some great sites that can assist you on your research which is the best card for you. There are plenty, just do a google search.

Cons

  • Credit cards are one of the most highly marketed products in the world. Everything is designed to get the user to pay interest and fees to swell the profits of the issuing company. Frequently those who start out with a low interest credit card often end up with crippling credit card debt. It is very easy for people to fall into their trap. Sure some may be winning at the game, but the wide majority are losing. It takes a lot of will power and mental energy to not lose. Some of your friends, that brag about winning the credit card game, are trading some token rewards for much higher interests and fees and thereby losing. Often the reason why credit card companies direct one to certain transaction with the lure of more points is that their research has show leads to more profitability for the credit card companies. They are machines that are hard to beat.

  • One side effect is you will spend more when not using credit. Research has shown that brain pain centers are not activated when one uses a credit card to pay. Why would restaurants and gas stations accept a fee for transactions that come with credit cards? The answer is that it leads to more profitability. It was not that long ago that most fast food restaurants did not accept credit. They started, and their profits soared and now encourage it. Not believing you will spend more using credit is self-deception. One way to combat this is to only use credit where you cannot spend more like paying the electric bill or putting gas in your car; but, not at a restaurant or a retailer.

  • Credit score is a lie perpetuated by the credit industry to encourage more lending. Those that seek to "hack" their score, in the end, leads to them paying a lot of unnecessary interest to banks. They only legitimate thing to borrow for is owning a home or a business. The difference between high and good scores do not really help in those cases. The more important thing is the business case for those transactions. If they are legitimate then you will get the best rate.

  • Using the credit card as an emergency fund is a popular but ill fated belief. So there is an emergency in your life. Perhaps you have to travel unexpectedly or you need to replace an item that is necessary to your life. Then shortly later you undergo a reduction in income. When using a credit card for the emergency, this will probably lead to credit card debt that may take a couple of weeks to build, but years to repay. If, instead, you use savings then it is far less painful.

I congratulate you on being deliberate in making this decision. Some become very emotionally attached to their credit card, especially their first one. Good work on having no debt. Keep up the good work!

Pete B.
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    I downvoted this because you're stating several things that are gross over-generalizations or are otherwise arguably incorrect (mainly, your first and third bullets under "cons.") I understand you have a strong personal bias against credit, in general, which is fine - but I think this verges on sensationalist misrepresentation of the facts in order to support that position. – dwizum Feb 03 '20 at 14:48
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    @dwizum I recognize that that is an unpopular version of the facts and expect the downvotes. Credit companies do their jobs well to perpetuate the desire to build a high credit score. More than a bias against credit, I have more of a bias of allowing lenders access to my income. – Pete B. Feb 03 '20 at 15:08
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    It is not so much a 'version of the facts', it borders on conspiracy theories. Several of the points you describe have other, more mundane reasons (and a comment is too short to explain it all). Your point about considering all sides is good, but otherwise you are just far out in make-believe land. – Aganju Feb 03 '20 at 16:32
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    @PeteB. You make several statements in the first bullet under 'cons' that are factually inaccurate, though. For example, "Everything is designed to get the user to pay interest and fees" - Not true. Merchant swipe fees are the income stream for responsible credit users and are why it is (often highly) profitable to offer high rewards cards specifically to people who don't carry a balance. Several Amex cards don't even allow you to carry a balance, let alone encourage it. – reirab Feb 03 '20 at 20:27
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    Even when you present facts you present them in a very misleading manner. It's true that it's vitally important to use a credit card responsible or bad things can happen, and it's correct to point out those risks. However, you present it as if it's impossible to use a credit card responsible when many can use them correctly, and benefit significantly from proper use of them.. There is a difference between warning about real risks if a card is misused and practically implying it's impossible to ever use a card responsible. – dsollen Feb 03 '20 at 21:18
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    @dwizum How are cons #1 and #3 arguable incorrect? Pete’s premise in con #1 is that most people fall into the trap of credit cards which, in America at least, is supported by the numbers ($6k+ in revolving CC balances on avg in the U.S. in 2019). While I think “lie” is a bit strong, con #3 is right: the credit industry has managed to convince people that high credit scores are the number one indicator of financial aptitude and financial responsibility. And this is so ingrained into consumers that it’s actually unpopular to note that credit scores are overhyped and over valued... – ARich Feb 04 '20 at 02:30
  • @ARich way to go, you are indeed raging against the machine. – Pete B. Feb 04 '20 at 11:20
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    Upvoted. This whole thread reads like a completely US centerd credit card commercial. To allow these companies to effectively skim a percentage off all consumer spending, trading "perks" you might need once a year (insurance, cash flow etc) for a percentage off every transaction and "cash backs" that are (when you think it through) always paid by the end consumer, was something the US let happen but we in Europe should know better. – Douwe Feb 04 '20 at 13:45
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    @ARich - bullet one, reirab got it right. Everything is designed to get the user to pay interest is not correct. Credit card issuers really don't like carrying balances because credit card loans have incredibly high risk. Even with high interest rates, a consumer who carries a high balance but doesn't have much transaction volume is a terrible consumer and is not likely to be profitable. Issuers like consumers who have high transaction volumes, since that generates interchange income, which has zero risk. – dwizum Feb 04 '20 at 13:55
  • Bullet three is just so consistently wrong (every sentence is factually wrong), I don't think it would be tenable to describe why in comments. I'd be happy to discuss in chat if anyone is interested. – dwizum Feb 04 '20 at 13:57
  • @dwizum No need to expand on it. Credit score does not exist in Germany, and when you apply for a loan or mortgage having a high limit on a CC is treated as potential debt, so it's a negative. – Douwe Feb 04 '20 at 14:27
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    Is this US-centric? I've never heard of any "bonus games" or reward programs for "normal" (non-gold/platin) cards. So if they try to advertise those, they do a bad job or my bullshit filter is just good enough, but it typically still let's me notice who tries to bug me. – Frank Hopkins Feb 04 '20 at 17:17
  • The only legitimate thing to borrow for is owning a home or a business — how about (higher) education? – gerrit Feb 06 '20 at 12:18
  • @gerrit Fair enough, some higher education is worthwhile to borrow for. However, this further illustrates my point. Credit score is not needed for student loans. They lend to 18 year olds with no credit. – Pete B. Feb 06 '20 at 12:48
  • @FrankHopkins this is definitely us centric. There are no rewards programs except fort platinum/gold cc customers down here in Eastern Europe – Gnudiff Feb 06 '20 at 19:17
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    @PeteB. I think this is a very good answer; I definitely like it. No matter US centric or not, it is applicable most everywhere. I do not find Europe all that different from the US or other countries as far as the fact that 'being in debt is risky and unpleasant' goes. – r0berts Jun 07 '21 at 11:47
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One CON that I haven't seen directly addressed is that, in general, spending significantly increases when a credit card is used.

Depending on the study, this can range from a mere 12%-18% increase to a 100% increase.

There was one study on vending machines where someone using a card would spend several times more what someone paying with cash would spend.

So, in many cases, the bonus points, miles, or cash back rewards are outweighed by the overall increase in spending.

Michael Richardson
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  • I've only seen studies that say this is a risk of paying by card vs. cash - so not only credit cards. – cbeleites unhappy with SX Feb 04 '20 at 16:51
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    While debit cards do have an increase over cash, there is still a significant difference between debit and credit. The "Brain pain" mentioned by Pete B is highest for cash, a bit lower for debit, and very much reduced for credit. – Michael Richardson Feb 04 '20 at 17:03
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Free cash withdrawal worldwide was always the main reason for me. Not all credit cards offer that but some of them do and it is really convenient, zero transaction fees, zero conversion fees. Also, depending on the card again, the ability to combine it with Google/Apple pay takes convenience to another level (Pay with smartphone on contactless terminals, pretty much available everywhere nowadays). Finally, some rather expensive cards will give you unlimited access to airport lounges (like MasterCard Platin from DeutscheBank for only 200 Euros a year). They are already worth it after 7 entries to lounges and usually come with additional travel insurance and car rental insurance.

Mehdi
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  • Apple Pay does not distinguish between debit and credit. I know not about NSA’s competition. – WGroleau Feb 04 '20 at 16:34
  • At least in the USA, the "cash withdrawal" benefit would be available only on debit cards (some but not all debit cards will offer zero transaction and zero conversion fees for worldwide ATM use) but all US credit cards charge cash advance fees. Digital wallets are equal between debit and credit. The airport lounges are the same here, linked to high-annual fee credit cards. – Ben Voigt Feb 04 '20 at 18:49
  • Not so. With a debit OR credit card, most banks apply a fee at their ATM. One of my banks refunds those fees. The other charges no fee in USA but one percent elsewhere. – WGroleau Feb 04 '20 at 21:41
  • That free cash you mentioned, is it not subject to interest immediately? – Dan Bracuk Feb 05 '20 at 04:23
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The pros are:

  • You're not spending your money until the bill comes in
  • If there is an issue (fraud, refund, stop-payment) then your money is not tied up; the bank's money is
  • You can get cash-back for purchases which you were going to make anyways

The con is discipline, period.

Psychologically you need to be responsible enough to not fall for the classic advertised trap of:

Increase your purchasing power with a credit card.

If you wouldn't buy it in cash then do not buy it on a credit card, simple.

Side-notes:

My personal habit has been to have one and only one credit card inside my wallet which I use for 100% of my purchases.

Yes, I too sign up for new CCs just for the bonuses. I shift my bills to those CCs until I've earned the bonus and then never use them again.

Do NOT sign up for a CC just because it advertises some great cash-back rate on something you purchase infrequently. CC companies employ the "divide-and-conquer" rule meaning that the more CCs you use then the more likely you are to overspend and that's how they conquer your money.

Do NOT add authorized users for the sake of adding an authorized user. If they aren't paying your bill regularly then their name should be nowhere near your card. My wife and I even maintain our own cards which we are responsible for.

When traveling, especially abroad, consider equipping yourself with 2 or 3 cards just in case one of them has an issue or is lost/stolen. However, remember to practice discipline!

MonkeyZeus
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    Frequent advice to travelers is to carry at least two cards from different banks. And on three occasions, a problem with one made me use the other one. – WGroleau Feb 04 '20 at 16:24
  • You’re welcome. Might want to add the “different banks” part. One of the times, when the debit card was rejected, the credit card from the same bank also was. Seems that even though I told them in advance that I was going to Turkey, they waited until I called them from there to tell me that there is so much fraud in Turkey that they automatically decline attempts from there! – WGroleau Feb 04 '20 at 16:40
  • @WGroleau: made a similar experience in Morocco... However, the most common issue I've seen North American tourists having here in Germany are old-fashioned credit cards without chip: most places won't accept them even if they do accept credit cards in general. (And successfully using your NA credit card at the train station vending machines at Frankfurt airport doesn't mean that will also be possible at other train stations!) – cbeleites unhappy with SX Feb 04 '20 at 20:52
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    All my US cards have chip; the last holdout got their act together in 2018. But even before that, the mag stripe always worked, though I usually had to show the clerk how to use it. :-) – WGroleau Feb 04 '20 at 21:38
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In the UK and I believe the rest of Europe you can make a claim against the credit card company as well as or instead of the company providing the goods or service. This is particularly useful when a company goes bankrupt between you paying for goods or services and receiving them.

Ian Turton
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    In Europe, I'd say this is one of the main benefits. Any kind of credit line (loans or credit card) which is directly tied to a purchase, leaves the lender on the hook along with the seller for any issues which arise. That means that if the seller isn't willing to resolve any issues, you can get your credit card company involved. They will often either just refund you and charge back against the seller, or put pressure on the seller to resolve the situation with you. – timbstoke Feb 07 '20 at 10:11