Everybody will agree that credit cards are very useful. A credit card is a powerful tool to improve your personal finances. However, if you do not choose an adequate credit card, it may actually make your finances worse.
The first important thing is to choose a credit card with no annual fee. You should focus on that first. Contrary to what credit cards want you to believe, it is often better to get a credit card with no fee and smaller cash back rather than an expensive credit card with a lot of cashback. The important thing is to do your research and compare with your actual credit card spending.
Let’s explore the different credit card options that are available in Switzerland.
What do I use my credit card for?
First of all, what do I purchase with my credit card? I use it for all my shopping in Switzerland. As long as the shop accepts credit cards, I tend to use it. Except for very small amounts when I have the cash on me. Why? The reason is simple, to maximize my cashback bonus.
I also use for all my online shopping. This means online shops and travels mainly. If there is no fee for using a credit card, I use it. Again this is to get some money back. The only case I am a bit more careful is for when I cannot pay in CHF. In these cases, you pay a penalty fee for foreign currency transactions. The more you use it (without extra fees), the more cashback money you will get.
Never use your credit card to withdraw money! All credit cards have terrible fees for withdrawal. Your debit card is here to withdraw money. And there is no bonus on the money you withdraw. Therefore, there are only disadvantages.
I have checked my credit card statements for the last 12 months and summed expenses. I have spent around 15’000 CHF on my credit card. Of those, I spent around 5000 CHF in foreign currencies. I will use this as the base to compare credit cards. Now that I see this, I realize it is not so much. Indeed, compared to the total of my spending. I should try to see if I can spend more on my credit card. There are a lot of bills I cannot pay with a credit card. Rent, taxes, and insurances, for instance, are the biggest bills. And I cannot pay any of them with my credit card.
And since we talk about credit cards, it is probably important to mention: Never carry a credit card debt! You will pay huge interest rates on this debt. Always pay your balance in full at the end of the month. There is no such thing as a credit score in Switzerland. Do not try to optimize your credit.
Let’s start with the credit card I had before this article. I had a MasterCard Standard card from PostFinance. I was paying 50 CHF per year for it. The cashback bonus is 0.3%. That means that for every 1000 CHF I spend, I get 3 CHF back. And I have to pay 1.2% for transactions in foreign currencies (USD and EUR for me). I have been at PostFinance for a long time. And I simply used the credit card they offered me without really comparing (shame on me!).
Let’s see how much it cost me for 1 year:
- Bonus: 15’000 x 0.3% = 45 CHF
- Annual fees: 50 CHF = -50 CHF
- Foreign fees: 5’000 x 1.2% = -60 CHF
- Total: 45 – 50 – 60 = -65 CHF
I know, I should compute the bonus before the transaction fees. But it makes a 50 cents difference. So it is better to keep it simple ;)
So each year, my credit card is costing me 65 CHF. All my cashback money is going to paying my fees. It is not even paying my annual fee! Let’s see if we can do better with other credit cards.
Other PostFinance credit cards
PostFinance offers other cards as well. All their Visa offers are the same as their MasterCard offers, so let’s focus on the MasterCard offers:
- MasterCard Gold: For 90 CHF a year and with 0.5% cashback. This would cost me 75 CHF a year.
- MasterCard Platinum: For 250 CHF a year and with 0.5% cashback. This would cost 235 CHF a year.
Unfortunately, I cannot have better fees by changing for another offer from PostFinance. So, I need to look at other banks and their credit card offers.
Other bank credit cards
Since I already had the best fit at PostFinance, let’s see how it compares with other banks. I am only going to consider real cash back. This is cash you are sure you can spend. Most of the other bonus systems are too dependent on your shopping style.
Let’s see the cheapest cards we can find:
- UBS Basic MasterCard: No fees (for 24 transactions per year), no bonus and 2% foreign fees: 100 CHF per year
- UBS MasterCard Standard: 100 CHF per year, no bonus and 1.75% foreign fees: 187.50 CHF per year
- Credit Suisse MasterCard Standard: No fees (for more than 10000 CHF per year), no bonus and 2.5% foreign fees: 125% per year
- Viseca MasterCard Silver: 100 CHF per year, no bonus, 1.75% fees: 187.50 CHF
- Valiant MasterCard Silver: 100 CHF per year, no bonus, 1.75% fees: 187.50 CHF
All the cards are more expensive than mine! And these are only the cheapest one. There are some much more expensive cards out there. For instance, the UBS MasterCard Platinum would cost 587.50 CHF per year.
Again, no better choice for me here. If you do not want to do the math yourself, you can also use the comparator from moneyland. But I believe it is almost always better to do the research yourself. You will avoid finding biased data.
Points system with cashback – Migros Cumulus or Coop Superpoints
Migros and Coop are the biggest retailers in Switzerland. Together, they have around 75% of the retail market in Switzerland. And, unsurprisingly, they offer very similar points system. Migros offers Cumulus points while Coop offerSuperpoints. For both, 100 point is equal to 1 CHF. Migros will give you cash coupons for the values of your points as soon as they reach 500 points. You can use these as cash without limitations in all the Migros shops and all the shops operated by Migros. For Coop, it is a bit less practical since you need to use the points for some of the services. Sometimes you can have a bit more value for your points.
Because I prefer Migros and their cashback system is more practical, I will focus on them. Their cards have exactly the same properties. So the results will be the same regardless of the retailer. If you prefer Coop, feel free to get their credit cars
Let’s see how much a Migros Cumulus MasterCard will cost me for 1 year:
- Bonus: 15’000 x 1/3% = 50 CHF
- Annual fees: 0 CHF = -0 CHF
- Foreign fees: 5’000 x 1.5% = -75 CHF
- Total: 50 – 0 – 75 = -25 CHF
My card would only cost 25 CHF a year. Compared to the 65 CHF I pay now, this is 40 CHF saved each year! This is not a lot but every little bit count in my opinion.
Revolut Credit Card for Foreign Currencies
Another idea is to use a prepaid credit card such as Revolut. They offer a prepaid credit card. It has free foreign currencies transactions for online payment. You can even withdraw small amounts anywhere in the world for free. And you can also have a physical credit card for a small fee. It is a great service. It could be awesome to save on all the currency transaction fees. I would use it only for foreign currencies. In my case, this could save me 75 CHF per year.
However, there are two problems with this option. First of all, it is a prepaid card. Every time you want to do a purchase, you need to make sure you have enough money on your card. And topping up the card is not instant. It is a normal payment. It takes at least one working day. Unless you pay for express. But in that case, it is probably better to use your regular credit card. I do not want to go to the trouble of having to top up the card every time I need. I could consider moving a large amount to cover small regular fees in foreign currencies.
Another problem with Revolut is that it is expensive during the week-end. You need to read the small prints because not everything is free with a Revolut card.
There are a few other alternatives like Revolut: Tide, TransferWise or Paysera. I do not claim Revolut is the best one. It is just the one I know the best. If you know of another alternative that can be topped up without charges, let me know!
If you want to learn more about Revolut, you can read my article on how to eliminate foreign fees with a Revolut credit card.
Travel hacking credit card
Finally, the last option for a credit card is to use it for travel. You can read so many stories on how people are traveling for free using their credit card bonus. This is mainly stories in the United States. In Switzerland, the best travel points credit card is the Swiss Miles & More MasterCard. This credit card will give you 1 award mile for every 2 CHF spent. And you will also get 1000 award miles every year. All this for 120 CHF per year. If we run the computation once again:
- Bonus: 15’000 x 50% = 750 + 1000 = 8500 miles
- Annual fees: 120 CHF = -120 CHF
- Foreign fees: 5’000 x 2.5% = -125 CHF
- Total: -120 – 125 = -245 CHF
The credit card would cost me 245 CHF per year and give me 8500 miles. The most expensive flight I take is to go to Hong Kong for around 800 CHF. I need 70’000 miles to get it for free. Then, that means I would get it free after 8.23 years. At which point, I would have paid 2000 CHF of fees. Not a very good deal! Even including the 20’000 welcome miles, it would not be interesting. I just do not spend enough on my credit card for this to be interesting. And the foreign fees are way too high.
If you want more information, MustachianPost came to the same conclusion: Travel hacking does not work in Switzerland.
Note: You can earn more points with the Swiss Miles & More American Express. But it is not well supported in Switzerland.
Currently, the best credit card in Switzerland is the Migros Cumulus MasterCard. This saves 40 CHF each year compared to my previous credit card from PostFinance. I also need to cut my spending in foreign currency. Of course, this is only the best credit card for me! If you spend more (or less), it may be different. Or if you never use any Migros shop, you probably have better options than this card. And if you do not spend anything on foreign currencies, it may also be different. Most important, you should always compare and do your research before purchasing such services.
As you can see from this article, there is not a lot you can do with credit cards in Switzerland. The best you can do is minimize your fees. Take a credit card without an annual fee. And also minimize spending in foreign currencies. If you can use a credit card in a shop, use it! If you can use a credit card online without extra fees, use it! Do not think of traveling for free using your credit card. Unless you are spending enormous amounts of money with it. In which case, you are probably not on the correct blog ;)
One other thing you can do is to change your credit card often. A lot of services are waiving the fees for the first year. And a lot of services are also increasing cashback in the first year. Or giving you a welcome package. If you do the math and be careful, it is possible that you can save a bit more money with this. However, be very careful! And do not forget to cancel the card before the second year. And there could be some minimum time for the contract. Personally, I do not think it is worth the trouble.
You can also find another alternative with the TCS Mastercard Travel Gold. Another way you can save a lot of money is to use a Revolut credit card to remove foreign exchange fees!
What about you? What credit card do you use? Do you have any tip to maximize cashback? Do you have any tip to minimize foreign currencies fees?