What to consider when choosing a credit card?

Postimees, April 2023

Priit Pekarev, the head of private customer banking at Holm Bank has pinpointed the main considerations for choosing a credit card.

Credit cards have become an integral part of our daily lives. They offer convenience, security and flexibility in managing finances. If you are an experienced credit card user you know the logic behind credit cards. If you are a novice in that field you will find some tips below that might become handy when selecting a credit card.

You might want to think through what for and how often you plan to use the credit card. If you need it, first of all, to ensure that you have funds available when the need arises make sure to pay attention to the fixed fees applied, such as a monthly fee for example. If you plan to use the card as a financial security plan in case of unexpected costs, it is better to choose a card without fixed fees. Unexpected expenses can evolve in connection with various life events, whether it is the need to cover unscheduled car repairs, replacing a washing machine or refrigerator, making use of a good last-minute travel offer, booking a hotel on vacation, renting a car or any other expense that you did not plan in advance.

Also, try to figure out which repayment plan you prefer. In most cases, cards have a fixed interest-free period, and you will not pay interest by making repayments during this period. The rule of thumb is that the shorter the repayment period, the lower the interest, but also the larger monthly payments and vice versa. If you use a credit card constantly, it is worth paying attention to the length of the plan.

Check out if the list of purchase transactions is easy to follow. Today, banks have apps where, with just a few clicks, you can find out which purchases or services you have spent money on and what limit you still have available. You can set a limit to keep your costs under control, and you can also request an additional limit if needed.

A plastic or a virtual card? You can make this decision based on your comfort and consumption habits. If your smartphone is what you slip into your pocket when you leave home, then a virtual card is handy for you. However, if you have a habit of paying with a plastic card at the checkout, and your wallet feels empty without a card, then prefer plastic. You can make online payments with both.

Security is always important. Here are a few very simple truths to follow when you decide to get a credit card. First, "don't-truths"... Don't keep the card codes with the card in your wallet. Do not save card codes with recognizable names on your phone. Do not enter card numbers on suspicious websites. There are also "yes-truths" - for online shopping, turn on "secure online shopping" and use 3D Secure confirmation. Always make sure that only you know the card codes. If you should lose the card, notify your bank immediately and block the card.

The credit card gives you a personal credit limit that you can use when the need arises. But keep in mind that a credit card comes with both opportunities and obligations.