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Italy (where I live) has introduced a tax on credit cards --- you pay 2 EUR (about 2.25 USD) in each month in which you spend more than 77 EUR with it (about 88 USD). This applies to each credit card owned by an Italian resident, even foreign-issued ones.

I have a credit card and a debit card, and at this point I wonder if it is a good idea to prefer the credit card for my small expenses, given the extra fee.

I don't normally make big expenses paying with plastic, just my normal shopping; but occasionally I book and pay for trips, and that is the biggest item on my expenses.

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    I am interested in how this is supposed to be enforced against foreign credit cards? Would there be an additional charge against the card, once I spend 77 EUR? How should anyone know? - Do you have a source for this? – Alexander Kosubek Aug 18 '16 at 8:04
  • @AlexanderKosubek You need to disclose foreign credit cards when filing your taxes, and pay the relevant fees as if they were Italian. I don't have data on how many Italians actually do it, but I don't wish to break the law. I don't think I can find a source in English, it's all Italian legal mumbo-jumbo. – Federico Poloni Aug 18 '16 at 9:32
  • Thanks! So this only applies to residents of Italy, then, I suppose... – Alexander Kosubek Aug 18 '16 at 9:40
  • @AlexanderKosubek Yes, it applies to everyone whose residence for tax purposes is in Italy. I'll edit this in. – Federico Poloni Aug 18 '16 at 9:44
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How does 2 EUR compare to how much you would otherwise spend using the card?

If you barely meet the 77 EUR threshold, you are paying 2/77=2.5% extra charge. If you typically put 1000 EUR on your card, it's an extra 0.2%, probably trivial.

Are the benefits you get from using the card -- convenience, defer paying, one monthly bill, etc -- worth 2 EUR to you? Like any price, that's a question only you can decide. A classic principle of economics is that there is no definitive answer to the question, "Is this product worth the price?" You can say what something is worth in the sense of giving the average price, but whether it is worth it TO YOU, only you can say. I hate apricots, so an apricot is worth pretty close to zero to me. I'm sure there are people who just love apricots and would pay 1000 EUR for one if that's the best price they could find.

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This type of tax would discourage the American practice of multiple cards. The basic advice for Americans is to avoid or minimize fees, so they look for cards and bank accounts that have low or zero fees.

On this Stack Exchange site we have had people propose multiple cards for both good and bad reasons:

  • multiple lines of credit helps your score;
  • unused (older) cards help your score;
  • unused cards (utilization rate) help your score;
  • multiple cards protect you if there is fraud on one;
  • not all cards are accepted everywhere;
  • zero percent balance transfers to a new card don't cost you anything;
  • that store card with 0% for 12 months same as cash are a great deal.

If every card had a $30 tax, that would discourage some of those multiple cards.

Based on your lifestyle, the protections and benefits have to be judged against the cost.

Somebody who uses it very infrequently may decide the once or twice a year they are hit with the tax is acceptable; others will know that they will hit the threshold every month so they just plan on paying the tax. That choice will then determine how they use it for everyday expenses. I mean once you know you will exceed the lower limit, it doesn't make a difference how high you take it.

Of course if the tax then changes to a percentage of what you spend via credit card, then that would change everything...

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    OP mentions that the charge would only be applicable if the usage was beyond 77 EUR. So I can still hold multiple cards and not use and not incur the charges. – Dheer Aug 18 '16 at 11:15
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    In fact, holding and using multiple cards with the same total limit as that of a single card, assuming that this does not prevent necessary larger purchases, could be a way to get around the limit. €77 is quite low, though, so this may be difficult in practice. – a CVn Aug 18 '16 at 14:22
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    Some people use multiple cards because e.g. one gives higher cash back at gas stations, another one at rotating categories, and a third gives a slightly higher percentage on all spending. A fee such as in the OP would discourage such behavior. – stannius Aug 18 '16 at 16:03
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I think you can consider this simply a higher credit card fee. Sure, that's not a perfect analogy, but it's almost certainly good enough.

Suppose you currently pay €20 per year to have the credit card. (I have no idea what the fees are commonly like in Italy.)

This increases the base fee from €20 per year to a maximum of €44 per year, with the option of a reduced fee down to €20 per year depending on usage.

Say you were to charge >€77 to the card eight months out of twelve in a year. That causes the cost of having the credit card to go up from €20 per year to €36 per year, for that year. If instead you keep the credit card, but set it aside and don't use it at all, it would still cost you €20 per year.

Would you get and use the card if those were the fees charged by the issuer (bank) as opposed to partially by the government? Would you keep both a debit and a credit card in such a situation?

The answer to that will be indicative of what you should do and whether your payment habits should change.

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Does a 2 EUR monthly fee make credit cards useless?

It come down to 2 aspects.

Convenience: Is it more convenient to use a card [could be ease, fraud protection, certain things that are online and only card].

Credit Score: Does having a credit card improve the score.

As an absolute number 24-30 EUR a year may or may not be a big amount. The question is individually does the benefits to have a card outweigh the fees paid.

  • I don't think anyone cares about credit cards as a source of credit score in Italy, I thought it was mainly an US thing. – Federico Poloni Aug 18 '16 at 9:33
  • @FedericoPoloni Credit Score is not just US, there are quite a few countries that have robust Credit Scoring mechanism in place. – Dheer Aug 18 '16 at 11:22

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