by
Marcin Domagała
Dyrektor Departamentu ds. Produktów
A credit card is one of the most flexible banking solutions that offers a wide range of possibilities. However, using credit card unwisely can lead to a huge debt. Every card holder knows they can use a card at a store, petrol station or online instead of their own money in the account. Everyone should be aware that, in order to avoid interest on the outstanding balance, they should repay it before the end of the grace period (when no interest is calculated). Few people know, however, that a credit card comes with a number of other possibilities.
A loan or a credit card?
According to a survey on the Polish credit card users conducted by GFK at the request of Citi Handlowy, as many as 72% of credit card holders took out at least one bank loan over the last 5 years. Interestingly, only 39% of the respondents considered taking out a loan on their credit card, and 28% of them decided this option was more expensive than a loan. In fact, usually it is quite the opposite – when converting a purchase into installments on a credit card, you pay only the interest, while a loan entails also a commission rate, which increases the Effective Annual Percentage Rate (EAPR). To calculate the EAPR, click here.
As many as 63% of us use the card for small expenses (up to PLN 1,000 per month), and take out a loan for greater expenses. Meanwhile, a credit card offers an immediate conversion into installments, without any formalities. It is an alternative to a loan or installment purchases that is worth considering.
A second card = more flexibility
An additional card issued within one credit limit is another option. We can give it to our relatives, including children aged 13-18. The primary card holder can set a separate limit for the additional card to monitor their children’s expenses, e.g. during a school trip or a summer camp. The additional card can also be used by our partner, which ensures a greater flexibility in planning the household budget. If you can keep a curb on your expenses, a credit card is more beneficial than a debit card. If you pay with “the bank’s money”, you can still keep your own funds on a savings account with higher interest.
Protection against unauthorized use
Nothing is more nerve-racking than losing a card or having it stolen. Proximity payments allow a thief to make a few/a dozen transactions in a short time and charge a high amount. However, most banks grant backward protection from the moment of reporting the loss. There is also a way to prevent online transactions where no PIN is required. A special 3D Secure service is here in place, which requires every transaction to be confirmed with a code sent via a text message. There are still more options to protect yourself against fraud.
Meet chargeback
One of the greatest advantages of credit card payments is chargeback. This is simply a protection against a dishonest services/products seller. If it turns out you never received an item you bought or you paid for a trip that never happened, all you need to do is report the transaction at the bank instead of arguing with the dishonest seller. Upon verification, the bank will pay you back the relevant amount and will claim the repayment from the dishonest company itself. Many banks also have systems for automatic monitoring of payment transactions in place. If the system detects any anomalies, e.g. a sudden payment in Nigeria just one hour after you made a payment in Poland, a bank’s employee will contact you immediately and ask if your card data might have been stolen. If that is the case, the card will be blocked. An interesting function is “one-time PIN”, which works very much like the 3D Secure. Here, the code confirming an online transaction can be sent via the bank’s application, a text message or an e-mail.
Better safe than sorry
With nearly every credit card, you can choose a life insurance package. Contributions are paid directly from the card’s account without any action on your part, and the extent and amount of insurance are very attractive as compared with other offers on the market. This solution is not only convenient, but also very practical. As you can see, a credit card offers vast possibilities and, when used reasonably, it can be beneficial to any household budget, which is why the offer of credit cards is worth looking into. When choosing an appropriate card, you should consider especially its maintenance costs, grace period and additional options, such as the ones described in this article. You can disregard the interest, as it is limited under legal provisions and all offers on the market will be very similar in this respect.
According to a survey on the Polish credit card users conducted by GFK at the request of Citi Handlowy, as many as 72% of credit card holders took out at least one bank loan over the last 5 years. Interestingly, only 39% of the respondents considered taking out a loan on their credit card, and 28% of them decided this option was more expensive than a loan. In fact, usually it is quite the opposite – when converting a purchase into installments on a credit card, you pay only the interest, while a loan entails also a commission rate, which increases the Effective Annual Percentage Rate (EAPR). To calculate the EAPR, click here.
As many as 63% of us use the card for small expenses (up to PLN 1,000 per month), and take out a loan for greater expenses. Meanwhile, a credit card offers an immediate conversion into installments, without any formalities. It is an alternative to a loan or installment purchases that is worth considering.
A second card = more flexibility
An additional card issued within one credit limit is another option. We can give it to our relatives, including children aged 13-18. The primary card holder can set a separate limit for the additional card to monitor their children’s expenses, e.g. during a school trip or a summer camp. The additional card can also be used by our partner, which ensures a greater flexibility in planning the household budget. If you can keep a curb on your expenses, a credit card is more beneficial than a debit card. If you pay with “the bank’s money”, you can still keep your own funds on a savings account with higher interest.
Protection against unauthorized use
Nothing is more nerve-racking than losing a card or having it stolen. Proximity payments allow a thief to make a few/a dozen transactions in a short time and charge a high amount. However, most banks grant backward protection from the moment of reporting the loss. There is also a way to prevent online transactions where no PIN is required. A special 3D Secure service is here in place, which requires every transaction to be confirmed with a code sent via a text message. There are still more options to protect yourself against fraud.
Meet chargeback
One of the greatest advantages of credit card payments is chargeback. This is simply a protection against a dishonest services/products seller. If it turns out you never received an item you bought or you paid for a trip that never happened, all you need to do is report the transaction at the bank instead of arguing with the dishonest seller. Upon verification, the bank will pay you back the relevant amount and will claim the repayment from the dishonest company itself. Many banks also have systems for automatic monitoring of payment transactions in place. If the system detects any anomalies, e.g. a sudden payment in Nigeria just one hour after you made a payment in Poland, a bank’s employee will contact you immediately and ask if your card data might have been stolen. If that is the case, the card will be blocked. An interesting function is “one-time PIN”, which works very much like the 3D Secure. Here, the code confirming an online transaction can be sent via the bank’s application, a text message or an e-mail.
Better safe than sorry
With nearly every credit card, you can choose a life insurance package. Contributions are paid directly from the card’s account without any action on your part, and the extent and amount of insurance are very attractive as compared with other offers on the market. This solution is not only convenient, but also very practical. As you can see, a credit card offers vast possibilities and, when used reasonably, it can be beneficial to any household budget, which is why the offer of credit cards is worth looking into. When choosing an appropriate card, you should consider especially its maintenance costs, grace period and additional options, such as the ones described in this article. You can disregard the interest, as it is limited under legal provisions and all offers on the market will be very similar in this respect.
