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When to 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. If you plan to use your credit card like a debit card—that is, paying off the balance in full by your due date—then using credit is a good idea. You’ll add positive behavior to your credit history and might earn a stash of cash back or points.

On the other hand, if you end up paying off the purchase over time, you’ll be charged credit card interest on your debt. Since the average credit card interest rate is quite high, currently hovering around 16 percent, you should ideally use your credit card only for purchases you know you can pay off instantly. The one exception is if you recently opened a credit card with a 0 percent intro APR, in which case you may have several months to pay off the purchase without accruing interest.

Below is our guide on when to use (or not use) a credit card for large purchases.

When to use your credit card for a large purchase

It’s important to think about why you want to put a large charge on your card. Is it for the rewards? Or the option to split up payments into manageable chunks? 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 a sign-up bonus—such as cash back, 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.

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.

0 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.

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.

Emergency situations

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

When not to use your credit card for a large purchase

You should never use your credit card when you’re unable to pay off the balance at the end of the billing cycle. However, there may be a time when you have to use your credit card for a large purchase unexpectedly, but never impulsively—we hope. The following are a few ways we believe not using your credit card for a large purchase will benefit you in the long run.

When you have unexpected medical bills or other emergencies

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. While charging unexpected medical debt on a credit card may be your only option in the case of an emergency, it can cost you if you’re unable to pay the balance right away. Consider the alternatives below or reach out to a credit counselor for more specific advice.

When you’re just doing it for the sign-up bonus or rewards

Making a large purchase you can’t actually afford simply to earn a sign-up bonus 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.

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 rewards you earn will never be worth more than the interest you rack up.

When you only want the limited time O percent APR

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 continue to grow.

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 ends.

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 or to meet the spending requirement for a sign-up bonus. Run the numbers to make sure you can comfortably afford to pay the balance straight away.

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 off your purchase over time

The Wells Fargo Reflect℠ Card offers a 0 percent intro APR on purchases and qualifying balance transfers for up to 21 months from account opening: 0% intro APR for 18 months from account opening on purchases and qualifying balance transfers. Intro APR extension of up to 3 months with on-time minimum payments during the intro and extension periods. Thereafter a variable APR of 14.49 percent to 26.49 percent 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 cellphone when you pay your monthly cell phone bill with your eligible Wells Fargo card (with a $25 deductible), that covers damage and theft.

The U.S Bank Visa® Platinum Card is another option with a 0 percent intro APR on purchases and balance transfers for 20 billing cycles (followed by a 14.49 percent to 24.49 percent variable APR). Balance transfers must be completed within 60 days of account opening. This card is also thin on perks (a trade-off for the lengthy intro APR periods), though it does offer the same level of cellphone protection as the Wells Fargo Reflect. If you pay your cellphone bill each month with your card, you’re covered for up to $600 per eligible damage or loss claim—minus a $25 out-of-pocket deductible.

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 15 months (12.74 percent to 23.74 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 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 16.74 percent – 23.74 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. If you’re trying to steer clear of debt, the best way 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 loanIf 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 bottom line

It’s important to always treat your credit card like cash when you’re contemplating using it for a large purchase. If you are unable to make the payment in full at the end of the month, you’re going to pile on unnecessary debt. It’s never a bad time to make a habit out of developing a plan if and when you find yourself in a situation where you have no other options than to use your credit card. If you can establish a manageable timeline in order to pay off your card before your balance gets out of hand, you can take back control of your finances.

Written by
Tim Maxwell
Tim is a freelance personal finance writer and blogger with a particular focus on credit cards and consumer lending. In 2002, he stumbled upon a copy of "The Millionaire Next Door," by Thomas J. Stanley and William D. Danko, which ignited a passion for learning and sharing fact-based money principles. Tim has a passion for demystifying personal finance and helping people live their best lives.
Edited by
Associate Editor