Many people don’t have a lot of extra money in the bank for large purchases, but sometimes it needs to be done. Whether your old lawnmower finally died or you need to finance the high cost of dental work, it’s a good idea to look at the available options. Depending on your situation, making the purchase with a certain type of credit card can save you a lot of money.
Cards with Zero Interest
Occasionally, credit cards offer customers the chance to make purchases and pay zero percent interest for a certain period of time. This can work well for someone who’s had a sudden expense and wants to pay it off in just a few months. Simply purchase with the card, then divide the total amount into manageable monthly payments.
With these types of offers, though, it’s essential to read the fine print. After the incentive period, the interest rate will likely jump to a much higher amount and it’s important to know how much you’ll be paying if you haven’t paid off the debt before the rate goes up. Additionally, it’s common for the zero percent introductory rate to end immediately if you don’t pay your bill on time.
Deferred Interest Cards
Similar to zero percent interest cards, some credit cards offer deferred interest on large purchases. This is especially true on the purchases made with store credit cards. In this case, you have a certain grace period where you won’t have to pay interest.
However, it’s important to note that interest sometimes accrues during this grace period. If you don’t pay off all of the balance before the grace period is over, you could find yourself suddenly facing hundreds of dollars’ worth of interest charges. This will be a nasty unexpected expense, so you really want to know what you’re getting into when choosing this type of card.
Low Interest Rate Cards
The higher the interest rate, the more money you’ll pay overall for whatever you’re purchasing. When you know that you have to make a big purchase, try to use the credit card with the lowest interest rate possible. This means that more of your money will go toward paying down that principal debt and you’re losing less money to interest.
Pay attention to whether the interest rate is variable, though. Sometimes company will change the rate when you’re not looking, and it could be months before you realize you’re paying a lot more than you thought you were.
Rewards Cards
Cards that offer rewards could be a smart option for those who are looking for a bit of a kick-back when making their purchase. These cards typically offer bonuses like cash back, miles that can be rewarded for travel, or points that you can use to redeem for gift cards or other perks from a company you like. When the purchase is big enough, the rewards you earn could be significant. A large purchase could also bump you into the next tier of service, earning you special rewards that only go to select customers.
However, these types of cards often come with annual fees. If you already have the card and enjoy the benefits you receive from using it, go ahead and make your big purchase with it. However, you may not want to apply for the card simply because you’re making a big purchase. High annual fees aren’t a smart move when you don’t plan to use the card often.
Finding the right credit card for a big purchase is a personal decision. Some people may want to avoid paying interest, while others may want to get a bonus from their purchase. No matter which camp you fall into, it’s important to consider the ramifications of whatever card you choose to use. Go into the purchase with a strong understanding of how much you’re going to end up paying in the long run.
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