When does it make sense to finance big purchases using credit cards?

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When does it make sense to finance big purchases using credit cards?

Credit card
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Highlights

  • It is beneficial to make big purchases through a credit card when the card has qualified for an introductory 0% APR rate on purchases.
  • Credit cards that offer a sign-up bonus are also a good way to make big purchases.
  • Another efficient way of financing big purchases through credit cards is when rewards are given for big purchases.

It is important to understand how we make payments while making purchases. There are numerous ways buyers pay for commodities and services, and one of the most common ways is through credit cards. However, is making purchases from credit cards a good option? If yes - let’s look at when it makes sense to use a credit card for making a purchase.

The big payments myth

People mostly use their credit cards when they make bigger payments. Many believe it is a smart decision to do so. At other times, people use it so that they can pay one hefty amount at once and later keep paying the instalments. Additionally, people also use credit cards because many brands often give advertisements for discounts when the purchase is made through credit cards.

But the main issue is that most credit cards charge high-interest rates. So, even if you get a discount while buying through credit cards, the deal will be nullified by the high-interest rates you pay on your future instalments while repaying for the balance.

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Besides, when people are in shortage of funds and end up using credit cards for big purchases, troublesome times arise. Some experts suggest that at such times, one should rather go for personal loans because, in most cases, the interest rates charged on personal loans are lesser than that of credit cards.

Thus, financing purchases is a critical task, and the cost of all the different ways of payments should be wisely calculated. However, there is one scenario wherein paying for big purchases through credit cards is beneficial. Let’s have a look at it.

Credit card purchases

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When does it make sense to finance big purchases through credit cards?

It is beneficial to make big purchases through a credit card when the card has qualified for an introductory 0% APR rate on purchases. Obtaining credit cards at a 0% APR rate is common because the issuers often use this technique to entice people to get more credit cards.

Thus, depending upon the company, one will have 12 to 15 months’ time frame for the repayment of instalments without any interest rate. Notably, the purchase cost does not increase because of the added interest rate.

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Additionally, many credit cards offer interesting rewards for big purchases. If one can pay back the instalments in a shorter time, the interest rate charges can be relatively lesser than the reward amount- thus, using the credit card for the purchases will be the right choice in such a scenario.

Many companies also offer to sign up bonuses. They do it to entice more customers to subscribe to credit cards. Thus, if someone plans to make a big purchase, they should look for credit cards offering significant bonus amounts and purchase the card.

FINAL READ: How credit card rates have changed over the years

All in all, making big purchases with credit cards is not always the wisest option. The interest rate issue is a significant concern because it raises the final amount of the purchase. However, if the above options are available, financing big purchases through credit cards can proved to be a wise choice.

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