How to Choose the Best Credit Card for Large Purchases
Large expenses, planned or unavoidable, may require the use of a credit card. In fact, even if you can pay cash for something, there are benefits to charging a large purchase to a card that could earn you rewards or protect your investment from defects or damage. As a reminder, an emergency fund is more important than ever and can keep you from accumulating costly debt. But if you do need to use a credit card to cover big expenses, here’s how to choose the best option.
Choose the card that maximizes rewards
If you’re going to spend a lot of money on a credit card, choose one that maximizes your rewards in the form of points, cash back, credits or spending-based bonuses. At the most basic level, you should use a card in your wallet that offers higher points for the category your purchase falls into, such as travel, home improvement, or entertainment. If you have big expenses that don’t typically qualify as a rewards category (like a medical bill or engagement ring), choose a card that has the best rewards rate on all purchases or that earns points you’ll actually use.
If it makes sense to open a new card account based on your credit situation, look for one that has a higher earning rate in the category you’re spending on or a generous welcome offer that could earn you extra points or get you closer to spending. based on rewards (for example, flight points or tickets for companions). Sign-up bonuses are typically awarded if you spend between a few hundred and a few thousand dollars in the first few months of opening your account, and making a large purchase is an easy way to reach that threshold.
Finally, be sure to check for merchant offers that can be added to your credit card through the issuer portal. Amex Offers, Chase Offers and Capital One Offers will return money to your account or add to your points balance if you make a qualifying purchase at eligible retailers (but these offers must be added to your card before you spend the money). Luxury clothing retailers, home improvement and appliance stores, event ticketing sites, and technology companies are often included in shopping offers.
Choose a card that will protect your purchase
Some credit cards offer benefits such as purchase protection, which covers loss, theft or damage to your item for a limited time, and/or extended warranty protection, which can be added to the manufacturer’s warranty in case your item fails. after the standard period has expired. . Whether you’re buying expensive appliances like a washer or dryer, or expensive electronics like a computer or TV, both options will give you peace of mind.
Depending on the terms of your card, purchase protection may have limits on coverage for certain types of claims or expense categories, so be sure to read your policy carefully and keep all receipts in case you need to file a claim. Here are some of the best purchase protection and extended warranty options.
Choose a card that minimizes interest
If you absolutely must make a purchase that you can’t pay in full after your monthly statement is due, a credit card with an introductory APR of 0% may be a good option to avoid adding interest to your debt. If one of your existing cards with other rewards or benefits listed here does not offer a grace period (or if the grace period is not long enough), you can open a new account that offers a 0% APR on purchases between 12 and 21 months. Here are some of the best 0% APR starter deals to consider. Some even have rewards such as points or cashback.
Remember, you’ll still have to pay off the balance before the end of the introductory 0% APR period or you’ll face costly interest and fees. Don’t neglect your balance until the last month, otherwise you may end up in the same situation you started in.
If you don’t plan to pay off your card balance by the due date, interest isn’t the only thing to consider. Your credit utilization ratio will likely also jump and stay elevated if you don’t pay off debt, which will impact your credit score . This may not be a major concern if you’re not applying for new credit in the near future and you have a specific plan for lowering your balance, but you should keep an eye on your score.