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


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

The Big Payment Myth

People mainly use their credit card when making larger payments. Many think it’s a smart move to do so. At other times, people use it so they can pay a large amount at once and then continue paying the installments. Moreover, people also use credit cards because many brands often offer advertisements for discounts when the purchase is made by credit card.

But the main problem is that most credit cards charge high interest rates. So even if you get a discount when buying with a credit card, the offer will be negated by the high interest rates you pay on your future installments while paying off the balance.

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Also, when people run out of funds and end up using credit cards for big purchases, hard times come. Some experts suggest that at such times one should opt for personal loans instead because in most cases the interest rates charged on personal loans are lower than those on credit cards.

Thus, the financing of purchases is a critical task, and the cost of all the different means of payment must be judiciously calculated. However, there is a scenario where paying for large purchases by credit card is advantageous. Let’s take a look.

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

It pays to make large purchases with a credit card when the card has qualified for an introductory APR rate of 0% on purchases. Getting 0% APR credit cards is common because issuers often use this technique to trick people into getting more credit cards.

Thus, depending on the company, there will be a period of 12 to 15 months for the repayment of the installments without any interest rate. Notably, the purchase cost does not increase due to the added interest rate.

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Plus, many credit cards offer great rewards for big purchases. If one can repay the installments in a shorter time, the interest charges may be relatively less than the reward amount – thus, using the credit card for purchases will be the right choice in such a scenario .

Many companies also offer sign-up bonuses. They do this to get more customers to sign up for credit cards. So, if someone is planning to make a big purchase, they should look for credit cards that offer large bonus amounts and purchase the card.

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

Overall, making big purchases with credit cards isn’t always the wisest option. The issue of interest rates is a significant concern as it raises the final purchase amount. However, if the options above are available, financing large purchases with a credit card may be a wise choice.

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