Should you use a credit card for a large purchase?

1

At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for

The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired.

Should you put a large purchase on your credit card? It depends. Consider how quickly you’ll be able to pay off your purchase and how much interest will accrue on the balance in the meantime. If you’re trying to earn a credit card sign-up bonus worth hundreds of dollars, a big purchase could be just the thing. And if your credit card offers a temporary zero-interest period that could give you enough time to pay off the balance interest-free.

There are a lot of good reasons to use a credit card for big purchases, but there’s also one good reason to avoid putting a large purchase on a credit card: credit card debt.

What happens when you make a purchase using a credit card? Well, if you don’t pay off your balance before your grace period expires, your credit card issuer will begin to charge interest. Even if your credit card has an excellent APR, those interest charges could quickly compound into what feels like an overwhelming amount of debt.

If you plan to use a credit card for big purchases, try to choose a card that offers a 0 percent intro APR—because the best credit cards for big purchases give you a period of time in which you can pay off your balance before it starts accruing interest. If your credit card doesn’t come with a zero-interest promo rate, do your best to pay off your large purchase as quickly as possible. Otherwise, it could end up costing you a lot more than you anticipated.

How do introductory APRs work?

Some credit cards offer a 0 percent introductory APR period on purchases and/or balance transfers. When the 0 percent intro APR is in effect, your card issuer won’t charge interest on any qualifying transactions. This means that you can make a large purchase on your 0 percent intro APR card and pay it off interest-free, as long as you pay off your balance before the intro APR period ends.

Once your 0 percent intro APR period is over, any remaining balances begin accruing interest at the card’s regular interest rate. The best 0 percent intro APR cards offer between 12 and 18 months of 0 percent APR, giving you plenty of time to make and pay off a large purchase. Before you put any major charges on an intro APR card, make sure you have a budget (and a plan) to help you pay off your purchase before the zero-interest period expires.

Should I consider a retail store card?

Retail credit cards often offer big discounts when you sign up. That means you could load a big purchase into your shopping cart, apply for the store credit card during checkout and use the one-time discount offer to save a lot of money on that purchase.

That said, store credit cards aren’t always worth it. Retail cards often charge significantly higher interest rates than standard credit cards and may include fine print deferred interest offers that could cost you money if you aren’t careful. Yes, store cards tend to come with fairly decent discounts and perks, but in some cases, you can only earn/redeem those rewards when you shop at that retailer, and you rarely have the flexibility that comes with a top rewards credit card.

Best credit cards for large purchases

Want to put a large purchase on a credit card? Here are some of the best credit cards for big purchases—whether you’re looking for a lengthy 0 percent intro APR period, top-level rewards or a high-value sign-up bonus.

Chase Freedom Unlimited®

The Chase Freedom Unlimited® card offers 0 percent intro APR on purchases for 15 months (14.99 percent and 23.74 percent variable APR thereafter), giving you well over a year to pay off your large purchase.

You’ll also have the opportunity to earn excellent cash back rewards: 5 percent cash back on Lyft purchases (through March 2022), 5 percent cash back on travel purchased through Chase Ultimate Rewards, 3 percent cash back on dining and drugstore purchases and 1.5 percent cash back on all other purchases.

Add in a $200 sign-up bonus if you spend $500 in the first three months, and the Chase Freedom Unlimited card might be the perfect tool to help you fund your next vacation.

Discover it® Cash Back

The Discover it® Cash Back card offers 0 percent intro APR on purchases and balance transfers for 14 months (11.99 percent to 22.99 percent variable APR thereafter), making this card an excellent choice to help you fund a large purchase or pay off an old debt.

The Discover it Cash Back card is a rotating category rewards card, offering cardholders 5 percent cash back (activation required) on bonus categories that rotate every quarter (for up to $1,500 in purchases per quarter, then 1 percent). Use our guide to Discover’s 2021 bonus categories to learn more about this year’s rotating rewards, which include gas stations and wholesale clubs as well as popular retailers like Walgreens and Amazon.com.

You won’t get a sign-up bonus with the Discover it Cash Back card, but new cardholders can take advantage of Discover’s Cashback Match program, which matches all of the cash back rewards you earn during your first year with the card. Depending on how much cash you earn with your Discover it Cash Back card, the Cashback Match bonus could turn out to be more valuable than a traditional sign-up bonus—especially if your large purchase fits into one of Discover’s rotating bonus categories.

Blue Cash Preferred® Card from American Express

The Blue Cash Preferred® Card from American Express offers 12 months of 0 percent intro APR on purchases (13.99 percent to 23.99 percent variable APR thereafter). This isn’t quite as long as you’ll get with the Chase Freedom Unlimited or the Discover it Cash Back cards, so keep that in mind before you use the Blue Cash Preferred card to fund a large purchase.

That said, the real reason to consider the Blue Cash Preferred card is because of its ongoing cash back rewards. Cardholders earn an industry-leading 6 percent cash back on groceries at U.S. supermarkets (for up to $6,000 in purchases per year, then 1 percent) and 6 percent cash back on select U.S. streaming services. You’ll also earn 3 percent cash back at U.S. gas stations and transit purchases, as well as 1 percent cash back on all other purchases.

The Blue Cash Preferred card also offers a top-level sign-up bonus: a $300 statement credit if you spend $3,000 in the first six months.

Unlike our other top picks, the Blue Cash Preferred charges a $95 annual fee ($0 introductory annual fee for one year). But if you want to fund a big purchase, continue to earn big rewards afterward and take advantage of a $300 statement credit, you might decide that the $95 annual fee is worth it.

Alternatives to credit cards

If you need to make a large purchase, credit cards are one option, but they aren’t the only one. Here are a few alternatives to putting a large purchase on a credit card:

Installment plans

Many retailers let you pay for major purchases in installments—especially if you’re buying something like a laptop, a refrigerator or a mattress. Retailers often work with third-party financing companies, like Klarna, to help you pay off your purchase, so read our guide to Klarna to learn more about how these types of installment plans work.

Always read the fine print before signing up for an installment plan, and make sure you understand what will happen if you don’t make the suggested monthly payments. You may owe back interest if you don’t pay off your balance by a specific period of time, so try to get your purchase paid off in full before your financing period ends.

Personal loans

If you want to fund a large purchase but don’t want to pay high credit card interest rates, you might want to consider a personal loan. Many personal loans offer lower interest rates than credit cards, especially if you already have good credit. Since both FICO and VantageScore like to see a mix of revolving debt and installment loans in your credit history, taking out a personal loan could even boost your credit score.

Savings

Sometimes the best way to finance a large purchase is to pay for it in cash. If you have a savings account or an emergency fund, consider using that money to cover your large purchase—especially if your savings are going toward a true emergency or a major unexpected expense. If your large purchase is more along the lines of a vacation, consider using a budgeting app to help you set aside money for the purchase over time.