Key Tips For Using Credit Cards

The 8.6 million credit cards to be found in Swiss wallets are frequently used for payments, with Swiss credit cards being used for around 70 million transactions every month. These figures from the Swiss National Bank indicate just how popular credit cards are in Switzerland.

Although nearly all consumers use credit cards, very few understand how big the differences between credit cards can be. By choosing your credit card carefully and using it smartly, you can save a lot of money every year. This moneyland.ch guide gives you useful tips for choosing and using credit cards. It also tells you when it makes more sense to pay with a debit card instead.

Tip 1: Save money by comparing credit cards

It is advisable to compare the costs and benefits of credit cards at least once a year. The interactive credit card comparison on moneyland.ch makes it easy to see which credit card is best suited to your needs.

The total costs for a standard credit card – for the frequent user profile in the comparison – is around 160 francs per year for the cheapest card and over 400 francs for the most expensive one. These figures only apply to standard credit cards – not to gold or platinum cards.

Tip 2: Use the right card when paying outside of Switzerland

Using credit cards to pay for purchases from foreign merchants can be very expensive. These two factors determine the added cost of foreign transactions:

• Foreign transaction fees: Nearly all Swiss credit cards have a foreign transaction fee that you pay whenever you use your credit card to make international transactions. This fee is typically between 1.2 and 2.5 percent of the transacted amount. There are a handful of Swiss credit cards that do not have this fee, including certain credit cards from Migros Bank and Swisscard.
• Currency exchange markups: The currency exchange rates used by your card issuer also directly affect the cost of foreign transactions. Data gathered by moneyland.ch shows that typical markups for franc-to-euro exchanges range between 1.3 and 3 percent. Markups can be much higher for other currencies.

There are certain debit cards that are more suitable than credit cards for international transactions. For example, debit cards from Bank Wir have a currency exchange markup of just 0.1 percent, and no foreign transaction fee. Debit cards from Wise and Alpian also have relatively low fees for foreign transitions.

To help you understand how big the differences can be: The same amount of foreign transitions that would generate 250 francs of fees with the most expensive payment cards would generate just 5 francs of fees with the cheapest cards.

You can find more detailed information about different cards and service providers in the guide to paying and withdrawing money while traveling.

Tip 3: For foreign transactions, always pay in the local currency

Seeing how much you will be charged in Swiss francs when paying for a purchase or withdrawing money may seem convenient. But choosing to pay in Swiss francs is a mistake.

The trick: The conversion to Swiss francs is done at a very unfavorable exchange rate. Choosing to pay in Swiss francs can result in you paying 10 to 15 percent too much.

Tip: To avoid falling for this trap, train yourself to always choose to pay in the local currency, and not in Swiss francs. That also applies when you pay foreign online merchants.

Tip 4: Do not use credit cards to withdraw money

Whether in Switzerland or abroad, when you make cash withdrawals at ATMs using a credit card, you are charged very high cash advance fees. Many credit cards have a minimum fee of 10 francs per withdrawal. With most Swiss credit cards, you would pay 12 francs to withdraw just 300 francs.

In contrast, most Swiss debit cards have a fee of just 2 francs per withdrawal, and free withdrawals at many ATMs. The fee for withdrawing money outside of Switzerland is typically around 5 francs per withdrawal.

Tip 5: Take advantage of welcome offers

Swiss credit card issuers sometimes offer sign-up bonuses for new customers. These welcome offers may be a one-time statement credit, a voucher, or extra reward points or airline miles. Credit card issuers can be very creative when it comes to welcome offers for new customers. Many conventional banks, for example, waive the annual card fee for the first year.

It is important not to let yourself get lured by welcome offers. The most important things to look at are the actual costs of using the credit card on an ongoing basis.

There are people who change their credit cards regularly just to profit from welcome offers for new customers.

Tip 6: Take advantage of reward programs

Many Swiss credit cards have reward programs. Depending on the credit card, you may be able to collect Migros Cumulus points, Coop Supercard points, points that can be redeemed for vouchers or merchandise, or frequent flyer miles. Some credit cards reward you with cash back: you receive a statement credit equal to a percentage of your total purchases. Another way that some issuers reward you for spending is by waiving the annual card fee for the next year when you spend a certain amount, or more, over the course of the year.

Often though, credit card reward programs look better in the advertisements than in real life. All card issuers have some exclusions - types of transaction on which you do not earn rewards. Depending on the reward program, you may have to actively redeem your rewards within a certain timeframe, after which they expire.

If you use Migros credit cards or the Coop Supercard credit card, you should be aware that you do not automatically earn rewards at Migros or Coop respectively when you pay with your card. You have to scan your reward program code separately to collect points for these purchases. Other credit cards automatically reward you for purchases from all retailers.

You can find more information in the guide to credit card reward programs.

Tip 7: Use the complimentary benefits

Some people only use credit cards for payments. But others prefer credit cards that include additional benefits like complimentary insurance or airport lounge access.

Some credit cards include complimentary insurance for shopping, travel insurance, or rental car insurance, among others. If these kinds of benefits could save you money, make account for them when looking for the right credit card. Depending on your needs, using a credit card with the benefits you need can be much cheaper than paying for them separately.

Important: In most cases, the complimentary insurance benefits only apply when you use your credit card to pay for the purchases or bookings.

You can find detailed information in the guide to credit card insurance benefits, the guide to rental car insurance, and the guide to airport lounge access with credit cards.

Tip 8: Choose the right credit limit

The credit limit is set by the card issuer based on your financial situation – primarily your income, wealth, and creditworthiness.

But be careful: Having too high a credit limit can encourage you to spend more than you plan for. Tip: Ask the card issuer to lower the credit limit to an amount that matches your budget for credit card spending.

Many card issuers give you the option of paying extra money into your credit card account, above the amount you owe for your credit card bills. This lets you extend your line of credit without increasing the amount you can borrow.

Tip 9: Use more than one card

It can be beneficial to use several different payment cards. That way if one card does not work for a certain transaction, you may be able to pay with one of your other cards. Make sure to use different card issuers and payment networks (Mastercard, Visa) for your various cards.

Using more than one card can also make sense from a cost perspective. For example, you could use the following setup:

• Purchases in Switzerland: A Swiss credit card that rewards you with points, miles, or cash back.
• Foreign transactions: A debit card with a low foreign transaction fee and small markups on currency exchange rates.
• Hotels and car rentals outside of Switzerland: A Swiss credit card with a low foreign transaction fee and small markups on currency exchange rates.

You are also rewarded with points, miles, or cash back for purchases from foreign merchants. But because the foreign transaction fees and markups are high, using a debit card can still work out cheaper for international transactions.

Tip 10: Pay your credit card bills on time

Always pay your credit card bills on time. If you pay late, you will be charged late-payment fees plus penalty interest. Depending on the card issuer, you may be charged interest from the date on which the purchase was made.

Tip: If you do happen to fail in paying your credit card bill on time, try contacting your card issuer and asking them to waive the late-payment fee and penalty interest. Often, card issuers can be quite accommodating, especially if you are a good customer and normally always pay your bills on time.

An easy way to avoid late payments is to set up a direct debit order with your bank. In this case, the money you owe is automatically debited from your bank account.

Tip 11: Pay your credit card bills in full

You generally have the option of paying just a small part of your credit card bill, and carrying the rest as a credit card loan. You are charged interest for this loan, and the interest rate can be as high as 11 percent per year. If you frequently make just the minimum required payment, the interest charges can substantially increase the amount you owe.

You can find more information in the moneyland.ch guide to credit card loans.

Tip 12: Account for Gold and Platinum credit cards

If you need insurance (travel insurance, shopping insurance, rental car insurance), airport lounge access, or certain other services, then it can be worth including more expensive credit cards in your comparison.

Gold and platinum credit cards have relatively-high annual fees, but depending on your needs, you may save money by using this kind of card. Many issuers have stricter criteria for applicants who want a gold credit card.

Platinum credit cards are often even more expensive, and often have even stricter criteria for applicants.

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