A rechargeable credit is a helpful function to control the expenditure with the credit card. In addition to prepaid credit cards, there are also other card models, such as the daily charge or debit card, which work with an “account credit”.
What is top up credit?
Many consumers are now thinking of a prepaid credit card. But this additional service has nothing to do with it. Specifically, it is about so-called daily charge cards.
This is a mixture of charge and debit card. Charge cards offer customers a classic credit line. The debit card is also known as an EC card. It is linked to a reference account. This is exactly what the rechargeable credit allows. The cardholder can transfer any amount to the reference account. This money is available in addition to the credit limit. You can top up your credit at any time.
Function of a daily charge card
The bank usually grants you a credit line for the credit card. If you do not pay any credit, the purchase runs as usual. All invoices are collected and debited as a total after one or two months. Alternatively, a transfer is necessary with some providers. This is the classic procedure for a credit card payment.
Now you want to top up your credit. In our example, it should be 1,400 USD. This is done by transfer to the card account. The capital remains there as a hidden reserve. If you make a purchase for 800 USD, this money is immediately offset against the credit. There are still 600 USD on the card account. What happens with another purchase of 1,300 USD? Here 600 USD are deducted directly from the credit. The remaining 700 USD go to the classic card limit.
Info: Some card issuers offer the option of temporarily holding a credit card in the credit. So you can expand the card limit for a larger purchase. This service is often only offered on request or for one-off purchases. A daily charge card is the better choice for regular use.
Advantages and disadvantages
The biggest advantage of a credit card that can be topped up with credit is the clear billing. As a consumer, you can easily keep track of your expenses. The direct debit contributes to a high level of transparency. Classic credit cards present the total debt due after 30 or 60 days. Anyone who tends to make spontaneous purchases can go into debt drastically.
Tip: Top up the daily charge card every month for the amount you want to spend. You only use the credit limit for emergencies. With this strategy you avoid unnecessary debt.
There are no real disadvantages. At most, the low popularity in Germany should be mentioned. Due to the low demand, the offer is clear. Many consumers choose a prepaid credit card directly. Perhaps this is due to the lack of knowledge about daily charge cards.
A positive credit rating is required because of the credit limit. If the Credit bureau is negative, the application will be rejected. In this case, a prepaid card is a useful alternative.
An overview of the pros and cons:
+ better control of expenses
+ Credit limit as a financial buffer
+ Interest on credit
+ immediate settlement with the card account
+ no debit interest
– only with sufficient creditworthiness
– not with negative Credit bureau
– no payment in installments
What are the costs?
Direct fees are not charged, on the contrary. The credit generates positive interest. The daily charge card thus mutates into a call deposit account. At the same time, you can avoid expensive borrowing costs. Some credit card providers pay cash from the ATM from the next day. Prepaid credit helps you avoid such cost traps.
The costs are expressed indirectly through the annual fee. Credit cards with a credit limit are usually not free. You benefit from extras such as travel insurance. Think carefully about which additional services you need. Normally, the following applies: the lower the scope of services, the cheaper the overall package.
Example of a debit credit card: DKB Visa-Card
The Deutsche Kreditbank’s Visa Card offers an individual credit line. You will receive a current account for the credit card, which you use to deposit the credit. This is how you get a transparent overview of your finances. There is no permanent basic fee. Free payments are also possible all over the world. In the first year, you can withdraw free cash worldwide. From the second year you will need a monthly payment of 700 USD. Otherwise, only cash withdrawals in the USDzone are free of charge.
Important conditions of the DKB Visa Card:
- positive credit possible
- 0.2% interest up to USD 100,000
- Pay worldwide for free
- free checking account
- no basic fee
- free cash worldwide
Conclusion: Daily charge and prepaid credit cards score with a high level of transparency. The user can better manage his purchases, because the settlement takes place immediately via the credit. So there is no traffic jam on unpaid bills. You also benefit from an interest on the paid-in capital. Rechargeable credit is interesting for all consumers who want to manage their finances more consciously.