Should you use a credit card for a large purchase?

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Whether or not you should use a credit card for large purchases depends on various factors. For example, using your credit card may be a good idea if purchasing a big-ticket item helps you earn a sign-up bonus, travel perks or other rewards worth hundreds of dollars. Charging an expensive product or service to a 0 percent APR credit card could also help you save on interest while paying off a large purchase over time.

Of course, there are also a couple of very good reasons why you shouldn’t use a credit card for a large purchase: debt and interest charges.

Since credit card interest is typically high, currently hovering around 16 percent, you should use your credit card only for purchases you know you can pay off. Making a large purchase on your credit card without a plan in place to pay it off will leave you carrying debt from month to month, plus you’ll be accruing interest that will make your purchase more expensive in the long run.

How to plan for a large credit card purchase

If you think you’ll be making a big purchase soon, take these strategic steps to limit your risk of incurring interest rate charges.

Before you make your purchase on credit, run the numbers to see how long it will take you to pay it off.

Consider this example: Your refrigerator is on its last legs, and you find a quality replacement for $1,500. You’re able to obtain a credit card offering a 0 percent introductory APR for one year to make the purchase. By dividing the purchase price ($1,500) by the number of interest-free months on your card (12), you would need to pay $125 each month to avoid paying interest after the intro APR period.

If you won’t be able to repay the balance within the promotional interest-free period, it’s probably best to avoid charging a major expense to your credit card. Even if your card has a relatively low APR, those interest charges will compound and may lead to insurmountable debt.

The same goes for if you’re making a large purchase on a credit card to score rewards points or to meet the spend requirement for a sign up bonus. Run the numbers to make sure you can comfortably afford to pay the balance straight away. You don’t need a 0 APR credit card for a large purchase if you already have the cash on hand to pay the balance but it’s unwise to drain your savings to do so because it could leave you vulnerable in the case of a financial emergency

Reasons you should—and shouldn’t—make a large purchase with a credit card

Since you should generally only make a large purchase on a credit card if you need extra time to pay off the balance without interest or you’ll scoop up some generous rewards and you can immediately pay off the balance, it’s important to think about why you want to put a large charge on your card. Here are a few reasons why using a credit card for a large purchase may work in your favor:

Sign-up bonus

Many credit cards offer an introductory or sign-up bonus—such as cash back or a larger number of points or miles—to entice you to sign up. To earn the bonus, you typically have to spend a certain amount within the first few months. If you already need to make a big purchase, it may be an excellent time to get a new credit card with a hefty bonus offer.

Making a large purchase you can’t actually afford simply to earn a sign-up bonus, though, is not a good idea. It’s best to earn sign-up bonuses by rerouting regular spending to your new card during the qualifying period, or only applying for the card once you’ve saved up enough money for a specific purchase, like new furniture or new appliances.

Earning rewards

If you know you can comfortably pay back the purchase in short order, it may be worth using your credit card for a big purchase to earn valuable rewards.  Earning rewards on purchases you would have made anyway is a great way to maximize your credit card strategy.

Any rewards value will quickly be overtaken by interest payments if you end up carrying a balance you can’t clear. It’s never a good idea to spend beyond your means in order to cash in on rewards—the math just doesn’t work out.

Zero percent intro APR

If you’re getting a new credit card with a 0 percent intro APR period, you might consider using it for a large purchase. You’ll still need to make minimum payments each month (if you don’t, your issuer may revoke the promotional rate and you’ll be charged the regular interest rate) but this strategy can give you more than a year to chip away at a big credit card balance.

Even with 0 percent interest, you should avoid charging a large amount unless you have a plan to pay off the balance before the end of the promotional period. Any balance you still owe at the end of the period will start accruing interest and will continue to grow.

Cardholder benefits

One of the biggest perks credit cards provide is extra protections and benefits, including extended warranties, purchase protection and travel insurance. For example, suppose you want to use a credit card to purchase a new washer and dryer  with a one-year manufacturer’s warranty. In that case, your credit card may offer an additional year of warranty coverage and double your protection.

Again, going into debt to snag an extra year or two with a warranty is not advisable. This would simply be an additional perk to using credit for a purchase that already fits in your budget.

Emergency situation

If you’re dealing with a financial crisis and need to cover immediate expenses, using a credit card may be an option. If you need extra time to pay for emergency costs, consider applying for a new 0 percent intro APR with the longest promotional period you can find and make sure to make at least the minimum payment each month.

Proceed with caution: Putting large purchases on your credit card without a plan or resources to pay them off may leave you in a more dire financial situation in the long run. Consider the alternatives below or reach out to a credit counselor for more specific advice.

Best credit cards for big purchases

Here are some of our favorite credit cards to use for big purchases, whether you’re looking for extra time to ease the financial burden or want to get something extra for a purchase you would otherwise just pay for with cash.

If you’re looking to pay your purchase off over time

The Wells Fargo Platinum card* offers 0 percent intro APR on purchases and qualifying balance transfers for 18 months (16.49 percent to 24.49 percent variable APR thereafter). While it doesn’t offer rewards or a sign-up bonus—the primary benefit of this card is the extended intro APR period—it has other protections and perks, including up to $600 protection on your cell phone (with a $25 deductible) that covers damage and theft.

The Citi® Diamond Preferred® Card is another option with 0 percent intro APR on purchases for 12 months and 21 months on balance transfers (followed by 13.74 percent to 23.74 variable APR). Balance transfers must be completed within four months of account opening. This card is also thin on perks (a trade-off for the lengthy intro APR periods), although it does offer a potentially lower regular APR after your first 21 months, depending on your creditworthiness.

If you’re looking for rewards for spending

The Discover it® Cash Back also offers a 0 percent intro APR on purchases and balance transfers for 14 months (11.99 percent to 22.99 percent variable APR after that) as well as rewards earning potential, making it a good option if you want to balance an intro APR period with ongoing value. It offers 5 percent cash back after activation on rotating categories each quarter (up to $1,500 in purchases, then 1 percent), and 1 percent on all other purchases. So, if your upcoming large purchases will fall into one of Discover’s 2021 cash back categories, this could be a great choice, especially as Discover will match all the cash back you earn at the end of your first year of card ownership.

The Chase Sapphire Preferred® Card is currently offering a significant sign up bonus: 60,000 points when you spend $4,000 in the first three months. That’s worth $750 toward travel through Chase Ultimate Rewards. There’s no intro APR period, so you’ll start accruing 15.99 percent to 22.99 percent (variable APR) on your purchase right away. But if you already have the cash at hand to pay the balance off and just want to earn rewards on a purchase you can afford to make anyway, this is a great sign-up bonus to take advantage of.

Alternatives to credit cards

Credit cards aren’t the only option to make a big purchase. Consider these alternatives before you charge a significant amount to your credit card:

  • Dip into your savings: The best way to steer clear of debt is to use cold hard cash whenever possible. General advice is to keep enough in your savings to cover at least three to six months’ worth of expenses in an emergency, so this isn’t a good option if a large purchase will take you significantly below this threshold.
  • Ask for an installment plan: Many retailers offer installment plans as a way to pay for a significant purchase, such as a furniture set, appliances or exercise equipment. What’s more, many of these retailers are partnering with buy now, pay later (BNPL) companies such as Affirm, Afterpay and Klarna.
  • Set aside your income tax refund: Consider dedicating your tax refund check to something special, whether it’s a vacation or a much-needed new water heater, instead of just adding it to your checking account. This way you can make a large purchase without a major impact on your regular spending and budget.
  • Apply for a personal loan: If you qualify for a personal loan offer with lower interest rates than your credit card offers, it may make sense to consider paying for a large purchase with a personal loan. It may even help your credit since the credit scoring models for both FICO and VantageScore look for a mix of revolving credit and installment loans in your credit history.

*The information about Wells Fargo Platinum card has been collected independently by Bankrate.com. The card details have not been reviewed or approved by the card issuer. The Wells Fargo Platinum card is no longer available.