Buzz
Large expenses, whether anticipated or unexpected, often necessitate using a credit card. Even if you could pay in cash, there are advantages to charging a large purchase to a card that offers rewards or safeguards your investment against potential defects or damage. Remember, having an emergency fund is more crucial than ever and can help prevent accumulating costly debt. However, if a credit card is necessary to cover a major expense, here’s how to choose the ideal one.
Opt for a card that maximizes your rewards
When making a large credit card purchase, choose a card that offers the highest rewards in the form of points, cash back, statement credits, or bonuses based on spending. At the most basic level, use the card that offers the best points accrual for the category that your purchase falls into, like travel, home improvement, or entertainment. If your big expense doesn't typically qualify for bonus categories (such as a medical bill or an engagement ring), pick the card with the highest rewards rate for all purchases or one that earns points you'll actually use.
If opening a new credit card aligns with your financial situation, consider one that offers a higher earning rate in your spending category or a generous sign-up bonus that could bring you closer to earning rewards like flight credits or companion passes. Typically, sign-up bonuses are given when you spend several hundred to a few thousand dollars within the first few months of opening an account, and a large purchase is an easy way to hit that spending threshold.
Don't forget to check for merchant offers that can be linked to your credit card through your issuer’s portal. Offers from Amex, Chase, and Capital One can give you cash back or boost your points balance when you make qualifying purchases at participating merchants (but you need to add these offers to your card before making a purchase). High-end fashion stores, home goods and appliance retailers, event ticket sites, and tech companies are often included in these merchant offers.
Select a card that offers purchase protection
Certain credit cards provide benefits such as purchase protection, which covers loss, theft, or damage to your item within a limited time, and extended warranty coverage, which may extend the manufacturer's warranty if your item fails after the standard period. This can be especially reassuring when buying expensive items like washers, dryers, or high-value electronics such as computers and TVs.
Depending on your card’s terms, purchase protection may have limits for certain claims or spending categories, so be sure to review your policy carefully and keep all receipts in case you need to file a claim. Here are some of the top options for purchase protection and extended warranty coverage.
Choose a card that minimizes interest charges
If you need to make a purchase you can't fully pay off by your statement due date, a credit card offering 0% introductory APR could be a smart choice to avoid accumulating interest. If one of your existing cards with other rewards or benefits listed here doesn’t offer a grace period (or if that period is too short), consider opening a new card with a 0% APR for purchases lasting from 12 to 21 months. Here are some of the best 0% APR introductory offers to explore, some of which even offer rewards like points or cash back.
Keep in mind, you must pay off your balance before the 0% APR intro period ends—otherwise, you’ll face hefty interest and fees. Avoid procrastinating on paying off your balance, or you might end up in the same financial predicament you started with.
If you plan to carry a balance beyond the due date, interest isn’t the only concern. Your credit utilization ratio will likely rise and stay elevated if you’re not paying down the debt, which could affect your credit score. This may not be a major issue if you’re not applying for new credit soon and have a clear plan to reduce your balance, but it’s still important to monitor your score.
