Should you use a credit card for large purchases?

When does it make sense to use your credit card for a big upcoming purchase — and when is it not wise?

Financing a big purchase with a credit card can be smart, given there are no additional fees if you pay off the purchase in time. However, there are some other factors to consider. Keep reading to find out when to use your credit card on a major purchase and when to steer clear.

First, if you’re trying to earn a large welcome offer on a new credit card, a big purchase can make it easier to reach the spending requirement within the introductory period (most welcome offers fall within a three- to six-month span). Depending on the welcome offer in question, it can singlehandedly make getting the card worth your while.

With a 0% annual percentage rate credit card, you can repay a large purchase over time without worrying about interest piling up. This is helpful if you’re trying to finance something you couldn’t otherwise afford. That said, always pay off your balance as soon as possible to remain in good standing with your issuer.

You might make a large purchase with your credit card because of the attached earnings rates or benefits. For example, if you put a $10,000 purchase on a card that earns 2% cash back on everything, that’s an easy $200 in your pocket.

Last but not least, you might be looking for purchase protection on a large purchase you just made, and your credit card has that added benefit.

There are plenty of times when using a credit card for a large purchase makes sense — just be sure to pay off the balance and avoid interest whenever possible. Otherwise, your card isn’t earning you money; it’s losing it.

What is considered a large purchase on a credit card?

There’s no set threshold for a large purchase. It depends more on your credit limit and how much you can afford to spend and pay off in a given time span.

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If you have one credit card with a $2,000 limit, you might consider anything over $1,000 a major purchase. However, if you have a handful of premium cards with high credit limits (and a healthy balance in your bank account), you might be able to afford to spend more and still pay off your card.

The key, as always, is to know your spending limits and avoid buying anything you can’t afford to pay off in full — the first of TPG’s 10 commandments for credit card rewards.

If you’re planning a large purchase ahead of time, it doesn’t hurt to notify your credit card issuer — through any of the usual channels — of your upcoming spending. Not only is it a common courtesy, but the purchase might trigger a fraud alert if the transaction amount is far outside your normal spending patterns.

While modern fraud detection algorithms are highly sophisticated and effective, even a temporary block could be inconvenient. Notifying your issuer in advance doesn’t hurt in this regard.

As you can see, there are many scenarios in which using your credit card for a large purchase can boost your bottom line.

Even so, always pay off your credit card in full. Try not to use it as a crutch, or you’ll likely end up paying interest. If you can avoid that, you can maximize your card’s earnings rates and take advantage of a welcome offer or two.