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.
When to use credit cards for large purchases
There are a few common scenarios where using a credit card for a large purchase can be a smart move.
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.
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.
Notifying your credit card issuer of a large purchase
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.
Bottom line
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.
TPG featured card
at American Express's secure site
Terms & restrictions apply. See rates & fees.
| 4X | Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 4X | Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year. |
| 3X | Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com. |
| 2X | Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com. |
| 1X | Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases. |
Pros
- 4 points per dollar spent on dining at restaurants worldwide and U.S. supermarkets (on the first $50,000 in purchases per calendar year; then 1 point per dollar spent thereafter and $25,000 in purchases per calendar year; then 1 point per dollar spent thereafter, respectively)
- 3 points per dollar spent on flights booked directly with the airline or with amextravel.com
- Packed with credits foodies will enjoy
- Solid welcome bonus
Cons
- Not as useful for those living outside the U.S.
- Some may have trouble using Uber and other dining credits
- You may be eligible for as high as 100,000 Membership Rewards® Points after you spend $6,000 in eligible purchases on your new Card in your first 6 months of Card Membership. Welcome offers vary and you may not be eligible for an offer. Apply to know if you’re approved and find out your exact welcome offer amount – all with no credit score impact. If you’re approved and choose to accept the Card, your score may be impacted.
- Earn 4X Membership Rewards® points per dollar spent on purchases at restaurants worldwide, on up to $50,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 4X Membership Rewards® points per dollar spent at US supermarkets, on up to $25,000 in purchases per calendar year, then 1X points for the rest of the year.
- Earn 3X Membership Rewards® points per dollar spent on flights booked directly with airlines or on AmexTravel.com.
- Earn 2X Membership Rewards® points per dollar spent on prepaid hotels and other eligible purchases booked on AmexTravel.com.
- Earn 1X Membership Rewards® point per dollar spent on all other eligible purchases.
- $120 Uber Cash on Gold: Add your Gold Card to your Uber account and get $10 in Uber Cash each month to use on orders and rides in the U.S. when you select an American Express Card for your transaction. That’s up to $120 Uber Cash annually. Plus, after using your Uber Cash, use your Card to earn 4X Membership Rewards® points for Uber Eats purchases made with restaurants or U.S. supermarkets. Point caps and terms apply.
- $84 Dunkin' Credit: With the $84 Dunkin' Credit, you can earn up to $7 in monthly statement credits after you enroll and pay with the American Express® Gold Card at U.S. Dunkin' locations. Enrollment is required to receive this benefit.
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- No Foreign Transaction Fees.
- Annual Fee is $325.
- Terms Apply.