The truth is that plastic money offers extraordinary convenience to consumers’ daily lives. On the other hand, those who do not understand the “terms of the game”, those who think they are simply buying now to pay later, or those who underestimate the extra fees may find themselves under a mountain of debt before they know it.
Credit cards are open consumer loans, which banks promote significantly, and the competition has brought significant bonuses, depending on the bank. Sometimes it’s cash back, sometimes it’s points to redeem, sometimes it’s better interest rates, whatever they’re called or how they work, in practice it means that bonuses can help significantly if you choose the card that works based on your his needs.
Data
According to data from the BoE, at the end of 2023 the total number of active credit cards had an annual increase of 4%, to 3.1 million cards. The demand is important and this is because they solve many problems. For example, if you have a big expense, a tax or an important purchase, on almost all cards you can put the repayment in interest-free installments. This alone is enough to convince many consumers. Even more, they offer “cash” or more correctly, purchasing power, when one needs it, even if it is beyond one’s present means, e.g. travel or medical discharge. Many keep them on purpose in order to have the most purchasing power when there will be significant discounts in the market (eg Black Friday) so that they can then make all their purchases at the cheapest price.
But not everything is… harmless. For those purchases that are not made in interest-free installments and are not paid off within the month, the cost of credit cards increases dramatically. For simple Visas offered by banks, the shopping rate ranges from 15.95% to 19.29%. This means that if someone makes purchases of €2,000, they will pay an installment of €181.41 and have a total interest cost of €176.97 for an interest rate of 15.95%. For an interest rate of 19.29%, the monthly installment rises to 184.59 euros and the total interest cost to 215.08 euros.
The interest rate on credit is much higher than simple consumer loans, while when you delay a payment, extra interest is added. The nominal interest rate, e.g. 16%, is a number, but not one that shows the real burden on the consumer. For this, in addition to all the conditions of a card, interested parties must also pay attention to the examples with the Total Annual Effective Charge Rate (APR) that the banks are obliged to show.
Example
For the purchase of goods worth 1,500 euros and repayment in 12 installments with interest and card costs (e.g. subscription), with an advertised nominal interest rate of 15.95%+0.6% (contribution Law 128/75), the actual surcharge is 22.35%. SEPPE is defined as the “Total Annual Actual Burden Rate” of a loan where it is expressed as a percentage of one hundred and is calculated from the total costs included in a loan such as taxes, fees, services, commissions. Without the additional charges, the total repayment installments of the debt come to 1,689.47 euros.
The danger of “extra” charges
According to debt management experts, the best case scenario is when you make a purchase and pay it off within the month, before the card bill comes out, and in most cases, you don’t even have a charge. Most cards have a minimum payment percentage, where the bank says you have to pay between 2% and 5% of the total balance each month. There you have the card’s interest rate, plus some extras, depending on the case.
This was the second best case scenario. From here on out, things get… more expensive. If instead of buying with the card, you chose to withdraw cash from it, the interest rate changes. An example of a card currently offered by a systemic bank has an 18.25% interest rate on purchases, but a 20.4% interest rate on withdrawals. Even worse that the difference, although it appears to be 2.25%, this only applies if you pay the installments on time. If you are late, late payment interest is added which is close to 2-2.5% and is added to the entire overdue balance.
In addition, there are charges close to 2.5% if you exceed the card’s limit. The costs of resending accounts are close to 1 euro, as well as the withdrawal from an ATM of another network which, depending on the bank, reaches up to 2 euros, but it is negligible in front of how much more money someone will be asked to pay, if they are not aware of the additional charges, beyond the advertised nominal shopping rate. We see that interest can easily pile on top of interest and unless payments start quickly to bring it down, the balance will quickly skyrocket.
INSTRUCTIONS CORRECT USE
- We choose a card based on our real needs, not ads.
- We do not delay installments, because the additional cost is high.
- We choose automatic repayment from an account so we don’t forget payments.
- We do not exceed the card limit due to extra charges.
- We keep card limits low.
- We avoid withdrawing cash because it is too expensive.
- Bonuses are only good if they fit the usage profile of each consumer.
EXAMPLE OF MAJOR CREDIT CARDS OFFERED
| Bank | Program | Shopping rate | Withdrawal rate | Annual subscription | Rewards program |
| National Bank | Silver Credit Card | 19,29% | 20,29% | 12€ | go4more |
| Eurobank | Visa Classic | 18,25% | 20,4% | 30€ | €twist |
| Bank of Piraeus | Piraeus Visa Classic | 15,95% | 19,15% | 29€ | Yellow |
| Alpha Bank | Alpha Bank Bonus Visa | 17,75% | 19% | 30€ | Bonus |
| Attica Bank | Attica Card Visa Classic | 17,5% | 19,5% | 25€ | Cash Back |
Source: Bank websites, moneyonline.gr
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