Germans Warm to Credit Cards

Germans Warm to Credit Cards – Slowly

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By Tom Fairless

Germany’s central bank offered a ray of hope Wednesday to those hoping the euro-zone’s largest economy will drag the bloc out of crisis by flexing some serious plastic.

According to a Bundesbank survey of payment behavior, Germans are gradually dropping their historical aversion to credit cards.

The survey found that 7.4% of transactions in Germany were paid by credit card last year, double the level in 2008, before the debt crisis began.

Still, the Bundesbank stopped short of predicting a wholescale change in attitudes. More than half of transactions continue to be paid in cash, and two-thirds of the survey’s 2000-plus respondents didn’t even own a credit card.

Card use in Germany also remains piddling by international standards. Last year, 56% of transactions in the U.K. and 45% of those in France were settled by card, compared with just 17% in Germany, according to data published last month by the European Central Bank. Indeed, Germany had the second-lowest card use of all EU countries, lower even than recent entrants to the club such as Bulgaria.

One explanation for the anomaly is a cultural aversion to debt. The German word for debt — as Friedrich Nietzsche noted — is the same as the word for guilt, and Germans are more likely than other nationalities to associate it with a loss of control.

“Cash gives the user greater control over expenditure, because you can’t spend more than you have,” says Michael Kemmer, a board member at the Federal Association of German Banks.

Germans have less of a tendency to take on debt to fund consumption than their Anglo-Saxon counterparts, although they often do so to buy houses for instance, says Thomas Nau, country manager for American Express in Germany.

That cultural attitude may go some way to explaining the sometimes emotional response in Germany to the bailouts of “reckless” southern European states during the debt crisis.

But there are other reasons for Germans’ partiality for cash. In a country where data protection is a highly emotive issue, the anonymity of cash is an important factor, says Mr. Kemmer. Cash is also a deeply emotional commodity in Germany, giving a feeling of security and even freedom, and it has historically been cheaper to use than cards, Mr. Kemmer says.

Notoriously tough insolvency laws, which have created a wave of “bankruptcy tourists” to the U.K., are an added incentive to steer clear of debt.

For all these reasons, “classic” credits cards—which spread payments over time—are far less widespread in Germany than in the U.S. and U.K. Germans rely instead on girocards or charge cards, for which the balance is repaid in full at regular intervals, Mr. Nau says.

To be sure, the Bundesbank survey shows the use of credit cards growing, partly due to the importance of online retail. But the bank doesn’t forecast any abrupt shift, stressing that Germans are “conservative in their payment behavior”. Sadly for those hoping for a credit-fuelled Teutonic spending binge, cash is likely to remain king for some time to come.