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6 Things to Consider When Choosing a Credit Card for Large Purchases

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If you’re planning to purchase an expensive item in 2016 or beyond, make sure you choose a good credit card to pay for it. As TPG Senior Points & Miles Contributor Nick Ewen explains, the best options include purchase protection, extended warranties and more — and they earn you valuable points or miles for your spending.

One of the first lessons I learned when I got into the points and miles hobby is to put everything possible on a travel rewards credit card. However, it’s also important to choose the best card to make sure that you get the most bang for your buck. This is especially true when it comes to making a large purchase, and today, I want to discuss six things to look for the next time you plan on swiping your credit card for a significant amount of money.

For starters, let’s agree that the definition of a “large” purchase can vary significantly from person to person. You may not be able to charge a new car purchase to a credit card, but spending $1,000 or more on a new television or furniture set may be much more common. So what type of card should you use? Here are six options to keep in mind:

1. Use a Charge Card

The Platinum Card from American Express is one of the best-known cards in this category.
The Platinum Card from American Express is one of the best-known charge cards.

As Richard Kerr wrote about in his post on buying a new car, one possible option is to use a charge card instead of a credit card for these purchases. The biggest benefit to using these cards is that they have no preset spending limit, though they do require you to pay off your balance in full each month. (Then again, you should always be doing this with any type of credit card, as I wrote about in my 10 commandments for travel-rewards credit cards post.)

As a reminder, one of the largest parts of your credit score is your utilization rate; in other words, how much of your available credit you’re using. Since charge cards don’t have preset limits, they aren’t included in this calculation. As a result, charging a $5,000 purchase to a charge card won’t have nearly the same impact on your credit score as charging that same purchase to a card with an $8,000 credit limit.

American Express is the main issuer of charge cards, and one of the most popular ones is The Platinum Card from American Express, which is currently offering a sign-up bonus of 40,000 Membership Rewards points after you use your new card to make $3,000 in purchases in your first three months. It also includes a wealth of benefits like a $200 annual airline fee credit, access to Centurion Lounges and By Invitation Only tickets for special events like movie premieres and the US Open. The card does come with a $450 annual fee.

Another great option is the American Express Premier Rewards Gold Card, which is currently offering a sign-up bonus of 25,000 Membership Rewards points after you spend $2,000 on purchases on your new card in your first three months of cardmembership. You’ll also enjoy 3x points on airfare booked directly with airlines and 2x points at US gas stations, US restaurants and US supermarkets. New benefits added to the card in June 2015 include no foreign transaction fees and a $100 airline fee credit. The card does come with a $195 annual fee, though it’s waived for the first year.

Before you apply for either of these cards, be sure to check the CardMatch tool to see if you’re targeted for a higher bonus. You could also try loading the application in a different browser, which is how I was targeted for a 50,000-point offer on the Premier Rewards Gold card.

2. Use a Citi-Issued Card

Citi's Price Rewind program can get you a refund if the price drops on an eligible item within 60 days of purchase.
Citi’s Price Rewind program can get you a refund if the price drops on an eligible item within 60 days of purchase.

Another possible option is to use a card issued by Citibank. On the vast majority of Citi-issued cards, you can take advantage of the Price Rewind program. This allows you to obtain a refund on many purchases if you (or the program’s online tracking tool) finds a lower price for the item you bought within 60 days. You do have to register the purchase, and if you find the lower price, you’ll need to submit a claim to be processed manually. Still, the benefit apparently saved consumers more than $2 million as of August of last year.

Just keep in mind that many types of purchases are excluded, including (but not limited to) motorized vehicles or boats, consumable products (like perfume or fuel), non-watch jewelry, collectibles and event tickets. The program has several other restrictions, like a limit of $300 per item and $1,200 per calendar year and can’t be found on an internet auction site.

As I mention above, the vast majority of Citi-issued cards are eligible for this benefit, including:

3. Use a Card with Purchase Protection

iPhone shopping electronics featured shutterstock 218533315
Purchase protection can be a big moneysaver if your item is damaged or stolen within the first few months. Image courtesy of Shutterstock.

Something else to consider for these large purchases is whether or not your credit card has purchase protection. Most travel rewards cards include some type of coverage along these lines, which will typically cover you for loss, damage or theft of a covered item within 90 days of purchase. However, you’ll also want to know how high of a limit your card has. For example, the Amex Premier Rewards Gold Card recently upped its coverage to $10,000 per occurrence, while the Starwood Preferred Guest Credit Card from American Express only covers you for $1,000.

Unfortunately, the only way to know the details of your coverage is to review your cardholder agreement or call the customer service number on the back of your card. Most of these policies exclude natural disasters, for example, and you can’t invoke the benefit on purchases of permanent household fixtures (like carpet or tile).

4. Use a Card with Extended Warranty Protection

Paying for my TV over 2 years in the past with my Sapphire card allowed me to purchase 2 new TVs for free.
An extended warranty benefit saved Richard Kerr when his TV went out. Image courtesy of Shutterstock.

A similar benefit to purchase protection is extended warranty protection. When you purchase an item with a stated manufacturer’s warranty, many credit cards will extend that warranty for an additional year. This can be especially useful on appliances or electronics, which always seem to go bad a month or two after the initial warranty period is up (or is that just my bad luck?). You’ll want to make sure to save the original receipt, as you’ll need it to submit a claim to invoke the extended warranty benefit, but if you’re making a large purchase, this can offer peace of mind and may one day put some money back into your pocket.

One great card with this protection is Chase Sapphire Preferred, which is currently offering a sign-up bonus of 50,000 Ultimate Rewards points when you spend $4,000 on purchases in the first three months from account opening (plus an additional 5,000 bonus points when you add an authorized user and make a purchase within the first three months of account opening). TPG Senior Points and Miles Contributor Richard Kerr included extended warranty protection in his list of lesser-known benefits of the Sapphire Preferred, and he was able to get the entire purchase price of a top-of-the-line TV refunded to him by using the card, even though it was out of the manufacturer’s warranty period. The card also includes a wealth of other benefits like no foreign transaction fees, double points on travel and dining and terrific redemption options, all of which make it a great card to get in 2016.

Speaking of valuable points…

5. Use a Card That Earns Transferable Points

 The Chase Sapphire Preferred always earns a place on this list thanks to a higher sign-up bonus and its great benefits and points-earning potential.
A card that earns transferable points (like the Chase Sapphire Preferred) is another great option for your large purchases.

I firmly believe that every traveler out there should earn transferable points on their credit cards. By not locking yourself into a specific currency, you hedge against a sudden and significant devaluation. These points tend to appear at (or near) the top of TPG’s monthly valuations, including his most recent iteration:

Each of these programs has its pluses and minuses, so the best advice I can give is to look at the various transfer partners and identify which you’re likely to utilize most frequently. One airline (Virgin Atlantic) actually partners with all five programs, while Singapore Airlines partners with all but Diners Club and British Airways partners with all but ThankYou Rewards.

One card that is particularly attractive in this category right now is the Ink Plus Business Card from Chase, which is currently offering a sign-up bonus of 60,000 Ultimate Rewards points after you spend $5,000 on purchases in the first three months after account opening. You’ll also earn 5 points per $1 on the first $50,000 spent in combined purchases at office supply stores and on cellular phone, landline, internet and cable TV services each account anniversary year. The card does come with a $95 annual fee.

6. Use a Card with a Spending Threshold Bonus

You and a companion can ride in style through British Airways' Travel Together benefit.
You and a companion can ride in style through British Airways’ Travel Together benefit.

Many credit cards offer valuable spending threshold bonuses during the year. Some examples include:

Charging a large purchase to a credit card with one of these perks can get you most or all of the way to the spending requirement to earn the bonus.

Arguably the most lucrative of these bonuses is offered on the British Airways Visa Signature Card: the Travel Together Ticket, earned after spending $30,000 in a calendar year. This essentially gives you a buy one, get one free award ticket on British Airways flights, though you will need to pay the carrier’s notoriously high fuel surcharges. TPG used this to fly OpenSkies from Newark to Paris-Orly last year, and depending on the trip you are planning to take, this could be a very valuable item.

The card is currently offering a sign-up bonus of 50,000 bonus Avios after you spend $2,000 on purchases in the first three months of account opening; an additional 25,000 bonus Avios when you spend $10,000 on purchases; or 50,000 bonus Avios when you spend a total of $20,000 on purchases within your first year. 100,000 Avios are worth $1,600 based on TPG’s most recent valuations, and even though the Executive Club program underwent a significant devaluation last April and will be eliminating its 4,500-Avios awards in North America as of February 2, there are still great ways to get value from the program. The card does come with a $95 annual fee.

So Which Card Is Best?

Everyone has their own definition of the “best” card to use for any given purchase, so it’s hard to claim that one of the cards mentioned above is categorically better than the others. However, if you look closely at each of the considerations above, it does indicate which products could be a good option for these large purchases. Here’s a table that breaks down these benefits on several popular cards:

Card

Charge Card?

Citi-issued?

Purchase Protection?

Extended Warranty?

Transferable Points?

Spending Threshold Bonus?

American Express Premier Rewards Gold Card

Yes

No

Yes

Yes

Yes

No

British Airways Visa Signature Card

No

No

Yes

Yes

No

Yes

Chase Sapphire Preferred Card

No

No

Yes

Yes

Yes

No

Citi Double Cash Card

No

Yes

Yes

Yes

No

No

Citi Hilton HHonors Reserve Card

No

Yes

Yes

Yes

No

Yes

Citi Prestige

No

Yes

Yes

Yes

Yes

No

Citi ThankYou Premier Card

No

Yes

Yes

Yes

Yes

No

Chase Ink Plus Business Card

No

No

Yes

Yes

Yes

No

Platinum Card from American Express

Yes

No

Yes

Yes

Yes

No

Southwest Airlines Rapid Rewards Premier Card

No

No

Yes

Yes

No

Yes

As you can see, all of the cards above earn at least 3 “yeses” in the six categories. Here’s how they stack up if you assign a point to each consideration.

Four points:
Amex Platinum
Amex Premier Rewards Gold
Citi Hilton Reserve
Citi Prestige
Citi ThankYou Premier

Three points:
British Airways Visa Signature
Chase Sapphire Preferred
Citi Double Cash
Ink Plus Business
Southwest Premier

One Final Consideration

One last thing to keep in mind with any upcoming large purchase is whether or not the merchant is offering any type of special financing offer through its credit department. You may not want to dip into savings to pay for a large purchase, and many retailers offer interest-free financing for a set period of time (usually depending on the total purchase amount). While you won’t earn points or miles on these purchases, it can make sense if you need to spread a large purchase out over time. Just be sure to pay the balance off before the promotion expires. Otherwise you’ll incur some hefty interest charges.

Bottom Line

Large retail purchases give you a great opportunity to maximize your points and miles; just make sure you use the right card!
Large retail purchases give you a great opportunity to maximize your points and miles; just make sure you use the right card! Image courtesy of Shutterstock.

If you have a large purchase coming up in 2016, you should definitely think about which credit card makes the most sense. Some of the considerations above relate to earning and redemption potential, while others act as insurance policies if things go awry. As always, feel free to remove those considerations that aren’t important to you or add additional weight to the ones that mean the most to you.

What credit card(s) do you typically use for your large purchases?

Chase Sapphire Preferred® Card

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  • Earn 50,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $625 toward travel when you redeem through Chase Ultimate Rewards®
  • Named Best Credit Card for Flexible Travel Redemption - Kiplinger's Personal Finance, July 2016
  • 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
  • Earn 5,000 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening
  • No foreign transaction fees
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Get 25% more value when you redeem for airfare, hotels, car rentals and cruises through Chase Ultimate Rewards. For example, 50,000 points are worth $625 toward travel
  • No blackout dates or travel restrictions - as long as there's a seat on the flight, you can book it through Chase Ultimate Rewards
Intro APR Regular APR Annual Fee Foreign Transaction Fee Credit Rating
N/A 16.24%-23.24% Variable Introductory Annual Fee of $0 the first year, then $95 0% Excellent Credit