Credit cards in Germany – why you probably don’t need one

Credit cards in Germany are not as common as what you might expect. Depending on your money culture & education in your home country, this could come as a shock. Credit cards are otherwise regarded as essential financial tool in many countries.

At the end of this post, you will be able to decide if you actually need one and which provider you should consider if you do.

Do I need a credit card in Germany?

Let’s be upfront about it – you probably don’t need a credit card for your day-to-day life in Germany.
If you need to make online purchases, withdraw cash at an ATM in town, or book a hotel, a debit card from N26 or a Girocard from your local Sparkasse should be more than sufficient. 

However, there are a number of scenarios when using them makes sense:

• Travel insurance: if you’re flying often, then using a credit card to pay for your flights will save you from having to pay for insurance.
• Frequent flyer benefits: they offer frequent flyer miles, access to lounges, luggage insurance, and trip cancellation refunds in the event that anything goes wrong with your flight.
• Consumer/fraud protection: In the event that you paid the wrong amount on a transaction, or you discover a fraudulent charge on your credit card, you can ask your credit card company to reverse the payment.
• Rental insurance: whenever you are renting a car or scooter, your credit card policy can cover the accident insurance for the duration of your rental.
• Convenience abroad: local German debit cards might not be accepted at all ATMs abroad, or against a fee. It might not also be possible to deposit large amounts too (e.g for a rental).

These are perfectly valid cases in which the costs & risks associated with a credit card can be justified. As you can tell, this mostly relevant for frequent travelers & big shoppers.

Credit cards are mostly relevant for frequent travelers & big online shoppers in Germany

If you just need to pay your bills and you don’t travel frequently, you can certainly get by with just a debit card. 

Alternatives to credit cards

If you recognized yourself in the bullet points above, you might be only interested in the benefits and less about the payment method itself. Instead of getting the card, you could also simply do the following:

• Sign-up for a German travel insurance: for only a few euros a year, you can get fairly good coverage from any insurance company. Different policies cover different risks but you will find the usual: trip cancellation insurance, rental, winter sports, medication & treatments abroad. It’s cheaper & more flexible than using the credit card because it covers everything, not just trips where you used your card. You can cover your family as well.
• Sign-up for a premium account at a neo-bank: Paid account from neobanks are covering pretty much all the needs quoted above. Roughly the same cost, less strain on your credit score:
  • N26 You & Metal
  • Revolut Metal
• Sign-up for a frequent flyers club: if you are after miles, frequent flyers club are cheap/free ways to get started.

What are the different types of credit cards in Germany?

There are four common types of credit cards and billing models used in Germany.

Debit card

For comparison’s sake: the debit card is the most common type of card throughout Germany (most cards issued by Visa and Mastercard in Germany are debit cards). Their operation is pretty straightforward. Whenever you make a purchase, your bank account is charged and funds are removed from it.

It functions in the same way as a Girokarte or EC-karte, except that it allows you to make online purchases and pay abroad like the best German credit cards. All of these purchases happen in real-time, and you generally receive notifications as they occur. Most German bank accounts have some sort of cobranded debit card (Visa or MC).

Charge credit card

The charge credit card is the most common type of credit card that you will find in Germany. Charge credit cards record your spending throughout the month and then charge you after 30 days, essentially giving you a month’s worth of interest-free credit. Once this period is over (usually at the end of the month), the credit card provider will issue you with an invoice detailing all of your purchases and how much money you owe.

On a specific agreed-upon date, the amount owed will be debited from your account in order to pay the bill.

Revolving credit card

A revolving credit card in Germany allows you to make a purchase now and pay it back later either as a lump sum or in installments. The credit card provider will then collect the amount over several months. While this offers a level of convenience, it’s not exactly cheap. Installment payments are usually accompanied by high-interest rates which you have to pay on top of what you owe. 

These cards are frequently touted as “no fee”, but because of the often exorbitant interest rates that accompany any purchases made on a revolving credit card, they can quickly become expensive. If you have extra money, you can also make unscheduled repayments and knock down the debt more quickly. The best-known revolving credit cards in Germany are American Express although many Visa cards also offer this option. 

Prepaid credit card

Prepaid credit cards to deposit money beforehand and only spend as much as you have in your account. They offer the same functionality as a normal credit card, allowing you to make online purchases and foreign ATM withdrawals, but limit your spending to the amount of money that you have deposited. Prepaid credit cards don’t offer any overdraft possibilities. 

Credit card from a bank or from a credit card provider?

There are pros and cons to getting your credit card from a bank as well as from a dedicated credit card company. 

Pros & cons of credit cards with a bank

Credit cards from banks are usually offered after you open a current account. This is beneficial both for you and the bank.

• The bank knows your creditworthiness and can issue you a corresponding line of credit.

• When making repayments, the credit card transactions are settled automatically with the money in your current account; this is essentially an interest-free loan and lets you avoid high-interest rates.
• if you do go too deeply into overdraft, the bank will stop your credit card and prevent you from spiraling into uncontrollable debt. 
• For many people this safety handbrake is worth the extra cost with a bank.

The only way in which you’ll end up paying interest is if you don’t have enough money in your current account and you have to go into overdraft to repay the credit card bills.

Pros & cons of credit card providers

While you might pay a bit more in fees than with an independent credit card provider, many people also appreciate having one company controlling all of their financial instruments – i.e. their bank account and their credit card.

On the flip side, some people dislike the fact that a single financial corporation has control over all of their personal finances.

• Separate expenses from income and current accounts.
• It’s quite easy to obtain one of these credit cards by simply submitting an online application.
• These cards tend to be cheaper than obtaining one from a bank, but the problem is that the card issuer won’t limit your spending. This means that you can quickly accumulate both debt and interest if you’re not careful.
• It’s a greater financial risk than a traditional bank which will cut you off should you exceed a certain limit.

These credit card companies don’t need you to pay back the entire debt at the end of the month. Often they just require a minimum payment – it could be as low as 20 euros – while your debt, and the accompanying interest, gets bigger every month.

Impact on your SCHUFA score

As everyone who moves to Germany knows, having a good SCHUFA score is significant, especially when it comes to getting a loan and appearing creditworthy. There are a number of credit-card-related scenarios in which SCHUFA will downgrade your credit score. 

• Having more than two credit cards, for example, will negatively affect your credit score as SCHUFA will assume that you have financial problems.
• If you fail to pay back any money that you owe on any of your credit cards in a timely manner, you’ll also be penalized. While you won’t notice these penalties immediately, you’ll discover them down the road when trying to take out a phone contract or get a mortgage.
• If you are going to use your credit card often, always make sure that you pay it back on time so that your SCHUFA score doesn’t suffer.

This is so crucial to your life in Germany that we really don’t advise owning a credit card in Germany, unless it’s very needed to you. There are alternatives (quoted above).

What are the best credit card providers in Germany?

DKB credit card

The DKB card is a charge credit card available to DKB customers who have a DKB cash account. It’s a true credit without any monthly fees and allows you free withdrawals at any ATMs worldwide with a 1000€ daily limit. Unlike other credit cards, you have to link your credit card to your DKB cash account; it’s not possible to link to another bank account. DKB will bill the amount due on the 22nd of every month and take it directly from your account. Since it’s a full-fledged bank, you get all of the digital infrastructures that go with it, including a handy app where you can monitor your transactions, and Google Pay and Apple Pay integration. Full DKB review here.

Pros

• Low 2,49€/month fee
• No foreign currency fees
• Free ATM withdrawals worldwide
• Works seamlessly with Apple Pay and Google Pay
• Easy online application 
• SEPA direct debit possible
• Comes with an integrated app

Cons

• Support is only available in German
• Website and app are only available in German
• You can only link your credit card to the DKB cash account

TF Bank

If you’re looking for one of the easiest credit cards to get your hands on, then the Mastercard Gold by TF Bank should definitely be on your list. If you’ve just moved to Germany and don’t have a credit history yet, or have a less than favorable SCHUFA score, you can still apply for this credit card, and likely have one issued to you. On top of being the most accessible card out there, this credit card has no annual fees, no foreign currency fees, and offers free ATM withdrawals worldwide. However, while TF Bank state that their card has no withdrawal charges, there are some hidden fees related to ATM withdrawals that should be highlighted. When withdrawing money from an ATM, TF bank will charge you an immediate 22,96% annual interest fee from the day you make the withdrawal until the moment you transfer the amount back onto the Mastercard.

So if you’re someone who is going to be withdrawing cash frequently, this might not be the best option for you. And if you do withdraw cash, it’s best to balance your account as soon as possible to limit the amount you will pay in fees.

Pros

• Very accessible and easy to apply for
• Online application
• Completely free – no annual fees
• No foreign currency fees
• Free ATM withdrawals worldwide
• Works seamlessly with Apple Pay and Google Pay

Cons

• 22.96% annual interest rate in case of cash withdrawals
• 19.39% annual interest rate in case of partial debit payment
• Customer service and website only available in German
• No SEPA direct debit possible
• Activating your account can be slow

Barclaycard Visa

The Barclaycard Visa is a revolving credit card in Germany issued by Barclays bank that has no annual fees and no foreign currency fees. You can also withdraw cash from any ATM worldwide without worrying about any fees (unless the ATM in question charges external fees), making the Barclaycard Visa ideal for frequent travelers. 

This card also offers four interesting repayment options. Like other credit cards, you have the option of partial payment but with high-interest fees. You also have the option of installment payments with an individual interest rate, a manual one-time balance settlement from the account associated with the card, or changing the repayment method to direct debit in the app.

The Barclaycard is one of the best credit cards in Germany if you’re looking for something that covers all of the basics.

Pros

• Completely free – no annual fees
• No foreign currency fees
• Free ATM withdrawals worldwide
• You don’t have to open a bank account to get the credit card
• Works seamlessly with Apple Pay and Google Pay
• Easy online application 
• SEPA direct debit possible
• Comes with an integrated app

Cons

• Interest rates on installment payments are 18.38%
• No English customer support
• Website is only in German
• Mobile app is only in German

Hanseatic GenialCard

The Hanseatic Bank GenialCard is a revolving credit card in Germany with a good reputation. It’s consistently regarded as one of the best free credit cards in the country (it even received a fancy Finance Award in 2020) by publications such as Focus Money. 

The Visa card is completely free and has no annual fees, and you can link it to whatever checking account you want. With it, you can make free global payments, pay absolutely no exchange fees on currency, and make free ATM withdrawals anywhere in the world. While you can pay off your debt in installments, you also have the option of converting the GenialCard into a charge credit card by enabling an automatic direct debit. This will settle the balance of your account and ensure that you don’t have to worry about paying high-interest rates on any unpaid debt.

Pros

• Completely free – no annual fees
• No foreign currency fees
• Free ATM withdrawals worldwide
• You don’t have to open a bank account to get the credit card
• Immediate line of credit up to 2.500 euros
• Works seamlessly with Apple Pay and Google Pay
• Easy online application 
• SEPA direct debit possible

Cons

• Interest rates on installment payments are 13.6%
• No English customer support
• Website is only in German
• You need to have been a German resident for at least 2 years.

The sign-up process:

This is how the sign-up process looks like:

1. Pick the best German credit card provider for your needs.
2. Send in your personal details.
3. Verify your identity via a video call.
4. Receive an activation letter at home, which you need to sign and send back.
5. Activate your card.

As you gathered from this post, there is actually only a very specific niche need for credit cards in Germany. Unless you are a frequent traveler, you should probably not use them since it can damage your financial health and your credit record. If you do need one however, pick one of the providers above and treat it like a financial product: with care.

I hope this overview of credit card providers in Germany was helpful to get around this topic. Feel free to leave a comment if you have any questions.

Bastien

Free credit cards in Germany – FAQ