Hamburg/Berlin - Most banks offer their customers credit cards that not only allow them to pay for goods and services but also have a number of extra features that at first glance appear very useful. But it's the revolving credit feature that has come in for criticism from several consumer protection organisations.
Revolving credit allows the customer to borrow money and then pay it back over several months. Over that time interest can build up if the loan is not paid off in full.
A credit card with a revolving function means bank customers do not have to pay off the borrowed sum in full at the end of the month.
The balance can be paid off at the customer's leisure but during that time interest builds up.
In some cases interest rates can be as high as 19 per cent, according to Kerstin Foeller, from Hamburg's Consumer Protection Office.
The average figure for credit card interest in Germany is 13 per cent. "If I only pay off the minimum amount every month, I can even end up with a higher credit rating," warns Kerstin Backhofen from Berlin's Stiftung Warentest, Germany's biggest consumer protection organisation.
Revolving credit is one of the many features that banks use to attract customers, according to Backhofen who writes for the organisation's monthly Finanztest magazine.
Other features are travel-booking discounts, air miles, an emergency service when abroad, insurance against travel cancellations or accidents while on holiday.
Not all of these features have to cost the customer but they rarely bring any real benefits for the card holder, according to Backhofen.
She also recommends closely reading the credit card's terms and conditions as they often play a major role in the most expensive features.
Backhofen says many credit card companies allows their customers the choice of when, and under what conditions, a bill should be paid off.
Some companies automatically charge interest unless the customer specifically excludes that when they sign the contract.
Backhofen says a good credit card is one that comes with few strings attached. "As long as I can pay with it easily, it's okay."
Two other points to look out for are low card fees and wide acceptance when abroad.
Ideally a credit card should cost nothing, or at least not more than 25 euros (39 dollars)a year in annual fees.
"There are a growing number of free credit cards on the market," says Foeller. Those cards, however, are often only free in the first year or the card holder gets the fee back if they have a minimum turnover.
Other free cards often come in connection with a current bank account.
A study by Finanztest magazine in 2007 found that there were only two cards in Germany that really came without an annual fee.
The best credit card deals are usually those that have few extra features, have low annual fees and are accepted widely abroad.
