Credit cards Good cards for budget stretchers

Some Swiss only pull out their credit card “as a last resort.” But credit cards can actually be helpful for budgeting.

by UBS Insights 11 Apr 2019

Bild: istockphoto

“Can I pay by credit card?” As often as not, the customer asking this at the checkout register sounds half-apologetic. The word “Credit” triggers mixed feelings in Switzerland. Many associate it with debt – something to avoid at all costs.

Unlike in a consumer's paradise like the USA, credit cards are hardly used in Switzerland. The majority of credit cardholders pay their bills on time, so interest is never even charged. Strictly speaking, credit cards are payment cards with many additional services such as a bonus program (like UBS KeyClub) and insurance services. But primarily, credit cards can help you control your spending. How so?

How do you spend your money?

Numerous personal finance books tell us to keep meticulous track of all our spending, from coffee to go to our fitness studio memberships. This, they claim, will show us what's digging that gaping hole in our budget and help us rethink our spending habits. But if you regularly pay by credit card, you can spare yourself the effort of this naïve and childish bookkeeping.

First, your monthly credit card bill already lists all of your spending. Second, UBS Digital Banking offers features such as the Personal Financial Assistant, which allows you to define a budget for each month. A quick check in UBS E-Banking or the UBS Mobile Banking App and you’ll see instantly where your money went.

Unlike your own, hand-scribbled record, the Personal Financial Assistant assigns individual expenses directly to certain categories such as “Gym” or “Vacations.” And if you need a more detailed breakdown, the transactions can be assigned manually.

Personalized notifications and limits

One especially practical feature is that UBS Digital Banking now handles almost any instruction. For example, it can notify you when a budget-relevant business transaction has taken place – and via your preferred channel: push notification, text message or e-mail. You can then be notified as soon as 70% of your budget is reached or exceeded, or be alerted automatically when payments above a certain amount are due. This is an easy way to prevent high-value items on your bill from causing any unpleasant surprises.

And if this isn’t sufficient control over your expenses, you can deliberately select a lower credit card limit: which will guarantee that you never go over budget. Another alternative is a prepaid credit card, which will only work if it’s “topped up” with sufficient credit. Any feeling of “living on credit” is banished once and for all.

Win points with every payment

No matter how you use your credit card, every time you pay by card, you collect KeyClub points, which have an actual cash value at KeyClub partners. And should you lose your card, it’s just a piece of plastic rather than your hard-earned cash. You can easily block your credit cards at any time, for example via the UBS Mobile Banking App.

Do you know the “magic number” on your credit card?

There are countless credit cards in use around the world, but they all have one thing in common: If you add up the digits of the credit card number according to the Luhn algorithm – named after computer scientist Hans-Peter Luhn – you arrive at a number that’s divisible by 10.

Here’s how the “magic number” works:

  • You take your credit card number and double every second digit, moving from right to left.
  • If the number is “8920,” you would double the 2 and the 8.
  • If you end up with a double-digit figure (16 as in this example), you have to work out the checksum (1 + 6 = 7).
  • You then add together all 16 digits – the total of the calculated and the remaining digits: 0 + 4 + 9 + 7 = 20.
  • The result is divisible by 10.

If this is not the case, you’ve probably got a counterfeit in your hand.