Why You Should Open a Credit Card When Planning a Large Purchase

Shot of a young couple using a digital tablet and credit card while relaxing at home.
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Credit cards can be useful tools, allowing you to afford important expenses when you don’t have the funds available right away. When used responsibly, credit cards can help you manage your budget as your cash flow fluctuates.

But even if you have the cash available to pay for a big-ticket purchase in full, you may want to consider putting it on a credit card anyway. Here’s why.

Follow: 19 Ways To Tackle Your Budget and Manage Your Debt
Check Out: 10 Credit Cards To Consider for Travel Rewards

1. Earn a Sign-Up Bonus

In order to attract customers, many credit card companies offer a sign up bonus when you open a new rewards card, according to Steffa Mantilla, a certified financial education instructor (CFEI) and founder of the personal finance website Money Tamer. This usually involves spending a certain amount of money on the card within a given time frame, she said. For example, you might need to spend $3,000 within the first three months of account opening. But if you manage to do it, the bonus could be worth hundreds or even thousands of dollars. 

Earn More Perks From Your Credit Card

“Many of the thresholds are low and easy to achieve, but the cards with higher bonus points usually have harder to hit spending goals,” Tamer explained. “If you plan on applying for one of those cards, do so a week or two before a planned major purchase. That way, you can put the expense on the new credit card and meet the points threshold.” 

Find Out: Why It’s Still Better To Use Your Credit Card Over Your Debit Card 

2. Borrow Money Interest-Free

Another tactic that credit card companies use to attract new business is offering 0% APR for a limited time — say, 12 to 18 months. During this introductory period, you can charge transactions to the card and pay zero interest on the balance. Once the intro period is over, the interest rate resets (today’s average rate is 16.16%).

“As long as you have a plan to pay it off in that time frame, it’s practically a free loan,” said Dustyn Ferguson, blogger at Dime Will Tell. By spreading the cost of your purchase out over time, interest-free, you have more cash available to put toward other important expenses, such as bills, loan payments or your monthly 401(k) contributions.

Helpful: 13 Credit Cards That Every 30-Something Should Consider

3. Get Rewarded

Aside from sign-up bonuses, there are other ways to essentially earn free money back on spending you have to do anyway. “Using the right rewards card can also help you earn valuable rewards on a big-ticket purchase, whether that’s cash back to pay off your statement balance or travel points or airline miles that can offset the cost of a future vacation,” said money-saving and budget expert, Andrea Woroch

Again, if you use this strategy, it’s important to pay off the balance right away so you don’t rack up interest charges. Otherwise, any savings you receive in the form of points or cash back will be quickly wiped out.

4. Enjoy Added Protection

Credit cards can offer many layers of protection that you simply won’t get when using cash, Woroch said. For one, there are protections in place for credit card users who experience fraud. If someone makes an unauthorized purchase using your credit card, the transaction can be reversed immediately and you won’t be held liable for more than $50 (though most issuers won’t make you pay anything).

Earn More Perks From Your Credit Card

When it comes to making a big-ticket purchase, certain cards offer a number of other protections. For instance, many major credit cards extend the manufacturer’s warranty for no added cost. “If you’re paying with cash, you may be tempted to buy the extended warranty coverage, which can be pricey,” Woroch said. Other perks your card may offer include price protection, purchase protection or even an extension on the time you have to make a return. 

See: What Happens When You Get Denied for a Credit Card — And What To Do Next

Use Caution When Making a Large Purchase on a Credit Card

It’s important to understand that using a credit card for a major purchase is a good idea when you handle your balance properly. Allowing debt to linger on the card will likely reverse any benefits you received initially.

“Definitely do not open a credit card for a big purchase if you are unsure if you’ll be able to pay it off,” Ferguson said. After all, the unexpected happens. An emergency such as losing your job or experiencing a health issue could turn a simple credit card bill into a burdensome debt. “Ideally, you have cash reserves that would allow you to pay off your credit card bill in case anything happens.” 

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Last updated: Oct. 18, 2021

About the Author

Casey Bond is seasoned editor and writer who has covered personal finance for more than a decade. Currently, she is a reporter for HuffPost covering money, home and living. Previously, she held editorial management roles at Student Loan Hero and GOBankingRates. Casey’s work has also appeared on Yahoo!, Business Insider, MSN, The Motley Fool, U.S. News & World Report, Forbes, TheStreet and more.

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