How to get the most out of a credit card?

By the end of March 2025, there were 2.1 million bank cards in use in Estonia, including around 1.7 million debit cards and 413,000 credit cards (Eesti Pank). This year, the credit card celebrates its 75th anniversary, while cash has been around for millennia. Most of us, from students to adults, carry a debit card in our pockets. However, credit cards are often viewed with caution because they are associated with living in debt. In reality, when used wisely, a credit card can be a powerful tool and a helpful financial companion. Annika Goroško, the Head of Retail Banking at LHV Pank, explains how a credit card can add value and a sense of security in various situations.

Interest-free period up to 40 days

A credit card lets you use the bank’s money: to do so the customer applies for a credit limit from the bank, which they can use in the future at their discretion. According to the agreement, once the customer begins to use this limit, interest will start to accrue on the used amount at the latest after 40 days.

The interest-free period of up to 40 days means that if a purchase is made with the credit card, for example:

• if a purchase is made on 1 September, the amount will have to be repaid to the bank by 10 October to avoid interest charges (the purchase has a 40-day interest-free period);
• if a purchase is made on 30 September, the amount will also have to be repaid to the bank by 10 October to avoid interest charges (there is a 10-day interest-free period).

For LHV credit cards, the interest-free period applies to card payments, online purchases, and cash withdrawals. This gives you time to cover your expenses without paying interest, as long as you repay the used credit before the next due date. The 40-day interest-free period does not apply if funds are transferred from your credit account to a regular account – interest starts immediately in that case.

Although all LHV credit cards offer a 40-day interest-free period, interest rates vary between cards. Each credit card also comes with unique benefits and perks. For example, one card may offer better purchase insurance, while another provides more favourable travel insurance. Partner offers also differ by card.

Flexible combination of your money and a credit limit

Having a credit card does not mean that the credit limit must be used; you can deposit your own money into the linked account and pay from that. The credit limit is there for larger purchases or when needed.

The same trick can even allow you to make a bigger purchase than your credit limit permits: simply add your own money to the credit account to create a positive balance. For example, if your limit is EUR 1,000 but plane tickets cost EUR 1,200, deposit EUR 200 of your own money and pay EUR 1,000 from the credit limit and EUR 200 from your own funds.

Many credit card holders use this method, depositing their own money each month while keeping the credit limit as a backup. Another approach is making larger purchases using the credit limit and then immediately depositing money back into the credit account afterwards. This helps avoid interest.

For example, you buy a new sofa worth EUR 1,200 on 5 September. Until 10 October, you do not have to pay interest on the credit amount used for this purchase. In October, you can choose to repay all EUR 1,200, part of it or none at all in the first months. If you decide not to make a repayment in October, you will have to take into account the first interest payment on 10 November. If the annual interest rate is 14%, then for a purchase of EUR 1,200, the monthly interest rate is approximately EUR 14. If you pay back the used credit amount in instalments within a few months, then the monthly interest expense will gradually decrease.

Purchase insurance protects your purchases

Online shopping continues to grow, covering everyday items like food, clothing, and electronics. Many services, from entertainment such as movie tickets to healthcare, are also paid for online.

Purchase insurance included with LHV Gold, Premium, and Platinum credit cards covers durable goods bought with the card for 180 days after purchase. This means that even if the product breaks through your own fault, the insurance helps cover the loss.

The maximum sum insured is EUR 10,000 per year for each item, case, and calendar year and up to EUR 5,000 per insured event. Keep in mind that the insurance deductible is EUR 30 per case.

Credit cards also offer advantages for online shopping. If you order several items of clothing (for example, different sizes to try on) and want to return some of them well before the payment date, you don’t have to tie up your money in the order if you pay for it with a credit card. This way you can ensure that on the day of payment you are already paying with your own money for suitable items of clothing.

Should it happen that the goods do not arrive or fail to meet your expectations, and you cannot reach an agreement with the merchant to resolve the issue, you can initiate the recovery process. If you paid with a credit card, you can turn off the automatic repayment for the duration of the dispute. In this case, the disputed amount will not be deducted from your account on the payment date and if the dispute is successful for you, the merchant’s refund can be counted as a repayment cover instead. In the case of a debit card payment, your money would be held under the transaction during this period.

However, it should be borne in mind that if, in the case of a credit card payment, the processing of the dispute should last longer than the 10th day of the month following the purchase, then interest will begin to be calculated on the credit amount used.

Convenient use of cash

A survey by LHV Pank and Kantar Emor showed that in 2024, only 10% of Estonians used cash daily. Compared to before, LHV credit cards now offer extra benefits, making it more convenient and affordable to use cash in moderate amounts.

With the Platinum, Premium, and Gold credit cards, you can withdraw cash from any Estonian or European ATM without any service fee: up to EUR 500 per month with the Gold card and EUR 1,000 with the Premium card. For example, if your child needs cash for a birthday gift for a classmate and there is no LHV ATM nearby, you can conveniently withdraw it from another bank’s ATM without paying a service fee.

Please remember that the 40-day interest-free period also applies to cash withdrawals. If you stay within the service-free limit and pay back the used amount by the 10th day of the following month, you will not incur any additional interest or service charges. We will send you a reminder on the use of your credit limit at the beginning of next month and recommend that you make a repayment no later than the 10th day to avoid interest.

You can also set up automatic repayments for LHV credit cards. In this case, it is up to you to ensure that your credit card account has the required amount on time.

Sense of security while travelling, from trip interruption to rental cars

Credit cards are useful when travelling in many ways. Many credit cards provide extra perks, such as travel insurance, which may extend to family members. Insurance may include health cover, baggage cover, travel interruption cover, third-party liability cover, and motor own damage insurance cover for rental cars abroad.

In addition, credit card holders can take advantage of partner discounts, while premium and Platinum cards provide them with access to business class lounges at airports. Therefore, before travelling, it is worth checking which benefits your LHV credit card includes before travelling. All information can be found on the LHV website.

What makes travel insurance that comes with a credit card particularly convenient is the fact that you have reliable insurance cover even if you go on an unexpected trip, such as a spontaneous weekend getaway to Riga. Keep in mind that travel insurance purchased separately may have a waiting period, so it may not be effective immediately, leaving you temporarily uncovered. Credit card travel insurance is effective immediately.

The travel interruption insurance that comes with a credit card can also be very useful. For example, if you bought a flight several months in advance, but fell ill a few days before the trip, your valid credit card with travel interruption insurance would compensate for the missed trip due to illness. If you do not have valid travel insurance at the time of illness, signing an insurance agreement after the illness would no longer cover this travel interruption.

Remember the principles of responsible borrowing

According to LHV Pank, card usage habits will continue to evolve, becoming smarter and more flexible. Bank cards remain a part of daily life and will find even greater use with innovations.

A credit card is a useful tool that makes shopping and travelling more convenient and secure. However, it is still a question of credit, so it is always worth assessing your expenses realistically and paying bills on time. This way, you can get the most from your credit card without unnecessary costs or worries. For simpler needs, a debit card is often sufficient.