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TPG reader Carla sent me a message on Facebook to ask about maximizing a large purchase:
“I’m getting ready to buy a new car. I read that most dealers cap the amount you can pay for with credit, but even if I can only charge $5,000 or so, which card will earn me the most valuable rewards? As far as I’m aware, I’d only get 1 point per dollar with my Chase Sapphire Reserve or Citi Prestige. Are there other, better options?”
One easy way to maximize spending is to use a credit card that earns bonus points for charges made in a given category. However, many purchases (such as new cars) fall outside of those categories, so you need to adjust your strategy. There are plenty of credit cards that earn valuable points for everyday (non-bonus) spending, but the calculus changes when you’re making a larger purchase. In that scenario, you can look beyond the points or miles you earn for each dollar spent, and instead find opportunities to bank lots of rewards all at once.
I think the best plan is to time large purchases with an application for a new credit card that offers a hefty sign-up bonus. For example, the Barclaycard Arrival Plus World Elite Mastercard comes with 40,000 bonus miles after you spend $3,000 or more in the first 90 days. That’s enough to redeem for a $400 travel statement credit, and once you factor in the points you earn on the actual purchase, you’re getting a return of more than 18% for meeting the spending requirement. In Carla’s case, the dealer might let her split payment between multiple cards, so she could potentially earn more than one sign-up bonus for her car purchase.
Another good option is to try and earn a spending bonus on a card you already have. For example, Delta Air Lines flyers could benefit from spending on a co-branded Delta Amex card either to earn bonus elite miles or to waive the MQD requirements for elite status. Alternately, you could use the Citi Hilton HHonors Reserve Card to help you qualify for the free weekend night certificate (after spending $10,000 in a cardmember year) or Hilton Diamond status (after spending $40,000 in a calendar year). Those bonuses are valued more subjectively, but they all make a nice addition to the points or miles you’d earn for using those cards in the first place.
If you’re not in the market for a new card and none of your current cards offer a spending bonus, then just go with whichever one offers the most valuable rewards. I value Ultimate Rewards points over Citi ThankYou points, so in Carla’s case I’d prefer to use the Chase Sapphire Reserve over the Citi Prestige Card. You won’t get close to the same return as you would with a new application, but you should get more than if you paid in cash (assuming you’ve already negotiated the best price possible).
For more tips on maximizing large purchases, check out these posts:
- How I Charged an Entire New Car to the Amex Platinum Card
- 6 Things to Consider When Choosing a Credit Card for Large Purchases
- How to Pick a Credit Card for Everyday Non-Bonus Purchases
Featured image courtesy of Kali9 via Getty Images.
The Points Guy Assessment:
The Chase Sapphire Preferred is a great pick for the beginner and the frequent traveler. The CSP has superb travel benefits, double points on certain purchases, and a 50,000 point sign up bonus. The $95 annual fee is waived the first year so this puts it as one of the less expensive cards, while still allowing you to earn one of the most valuable point currencies.
- 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®
- Chase Sapphire Preferred® named a 'Best Travel Credit Card' by MONEY® Magazine, 2016-2017
- 2X points on travel and dining at restaurants worldwide & 1 point per dollar spent on all other purchases.
- 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