How do you issue a cash covered credit card?
With a cash covered credit card, an amount equal to the credit limit of the card is deposited in a blocked account. No calculation is needed for the credit limit prior to issuing a cash covered credit card. Payments made with the credit card are therefore always fully covered by the balance in the blocked account. Since the consumer can repay any debt on the credit card in full at any time, there is in principle no risk that the consumer cannot repay the amount borrowed.
The amount in the blocked account has to be the same as the credit limit
An important condition is that the amount in the blocked account must be at least as much as the credit limit of the credit card, and that the consumer is always free to repay their debt on the credit card with the balance in the blocked account in full without any penalty. Naturally, the other (statutory) regulations with respect to credit provision still apply.
When does a calculation of the maximum credit to be provided have to be made?
In case of credit cards that are not fully covered by a deposit in a blocked account, a calculation of the maximum credit to be provided does have to be made. The AFM’s advice is to base the calculation of the maximum appropriate credit limit for a credit card on a term of not more than 5 years.
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