What you need to Know when using a Credit Card for Large Purchases
If you need to make a large purchase, but you want to avoid taking out a personal loan or other line of credit, you may have considered using your credit card to make the large purchase. Credit cards can be quite convenient for making large purchases, and they can potentially save you from high interest rates commonly associated with retail credit and personal loans.
However, like any other type of financial tool, you should make sure that this is the best option for you. Here’s what to remember before making a large purchase on a credit card:
- Consider your credit card’s interest rate and do the math to see if it worth charging a large purchase. In addition, don’t forget to consider what your minimum payment will be once you have charged the large purchase.
- Some credit cards offer special introductory rates, but pay close attention to the expiration of the introductory rate, as this could affect the amount you pay in finance charges if you are unable to pay off the purchase before the expiration of the introductory rate.
- Consider using convenience checks that often come in the mail from your credit card company. Convenience checks often come with lower interest rates, and often these interest rates are fixed for the purchase. However, consider the fee charged by the credit card company for the convenience of using these convenience checks; often times, these fees can be quite high.
- Before making a large purchase, consider whether it will put your credit limit at its maximum. In other words, always avoid carrying more than 30 percent of your credit limit on your credit card, as this can lower your credit score.
- If you plan on making a particularly large purchase, you may want to call your credit card company ahead of time to alert them to this charge. Many credit card companies will decline a large purchase if they suspect fraudulent activity. It is therefore wise to avoid the hassle and embarrassment of a credit card denial by calling ahead and alerting them of the impending purchase.
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