Credit Cards

When does it make sense to finance large purchases with a credit card?

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It may actually be a smart move to load something big onto your cards in this situation.

Key points

  • Credit cards are generally not a very affordable way to borrow.
  • If you’re making a large purchase, there may be other cheaper types of debt.
  • However, a credit card might be the right way to finance a large purchase if it has a 0% APR offer.

Credit cards are known for having high interest rates. As a result, it’s generally a good idea to avoid carrying balance. Generally, you don’t want to load anything on your cards that you can’t pay when the statement arrives; Otherwise, your purchases will be much more expensive due to the interest you will have to pay.

If you have to finance something that you can’t pay all at once, other types of debt, like personal loans, might be a cheaper alternative. Since personal loans have lower interest rates, they should be considered before a credit card in most circumstances.

However, there is an exception to this general rule. With the right kind of credit card, financing a large purchase with your card could be a smart move.

This type of credit card could be ideal for paying for purchases over time

The best, and probably the only, time when it makes sense to finance large purchases with a credit card is when you can qualify for a card that offers a 0% introductory APR on purchases.

Cards offering 0% introductory rates are common, as card issuers use this type of enticing offer to encourage customers to sign up. And, depending on the specific card and offer you get, you may have 12 to 15 months to pay off the balance due on the card without paying any interest on your purchases.

This is one of the only types of loans where you can pay for your purchase over time and not pay any interest.

Is a 0% APR card the best option for you?

Using a 0% APR credit card to finance a large purchase is the right choice in a few key circumstances. For this to make sense:

  • You must qualify for this type of offer from a card issuer. This generally means that you need at least good credit.
  • Your credit limit must be high enough to be able to finance the purchase. Credit limits vary depending on the card issuer and your financial credentials.
  • You must ensure that you can pay for your purchase in full before the 0% rate expires. If you can’t, you could be affected by high interest rates on credit cards, and this method of financing could end up costing more than other options, such as a personal loan that offers a lower interest rate.

If you can easily qualify for a card that offers you many months to pay off your purchases interest-free, and you’ve done the math and can easily make monthly payments large enough to pay off the debt in full, then there are few downsides to choosing a card. 0% APR card.

Just be smart about buying more than you can afford and consider setting up auto pay to ensure your payments arrive on time and your balance is paid to $0 before your promotional rate expires. If you do, your financed purchase doesn’t have to cost you any interest thanks to your smart use of credit card benefits.

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