Big expenses, whether they are planned or come as unavoidable surprises, may require the use of a credit card. In fact, even if you can pay for something in cash, there are benefits to charging a major purchase to a card that can earn you rewards or protect your investment from defects or damage. As a reminder, an emergency fund is more essential than ever and can keep you from accumulating costly debt. But if you do need to use a credit card to cover a big expense, here's how to choose the best option.
If you're going to spend a lot on a credit card, select one that maximizes your rewards in the form of points, cash back, statement credits, or spending-based bonuses. On the most basic level, you should use the card in your wallet that offers a higher points accrual for the category your purchase falls in, such as travel, home improvement, or entertainment. If you have a big expense that wouldn't typically qualify as a bonus category (a medical bill or an engagement ring, for example), choose the card that has the best rewards rate across all purchases or that earns points you will actually use.
If it makes sense with your credit situation to open a new card account, look for one that has a higher earning rate in the category you are spending on or a generous welcome offer that can net you extra points or get you closer to a spending-based reward (such as flight credits or companion passes). Sign-up bonuses are generally awarded if you spend a few hundred to several thousand dollars in the first few months after opening the account, and a big purchase is an easy way to meet that threshold.
Finally, be sure to check for merchant offers that can be added to your credit card through your issuer portal. Amex Offers, Chase Offers, and Capital One Offers will apply cash back to your account or add to your points balance if you make a qualifying purchase at eligible merchants (but these offers must be added to your card before you spend). High-end clothing retailers, home goods and appliance stores, event ticket sites, and tech companies are often included in merchant offers.
Some credit cards offer benefits like purchase protection—which covers loss, theft, or damage to your item for a limited time—and/or extended warranty protection, which may add to the manufacturer's warranty in case your item fails once the standard period is up. If you are buying an expensive appliance—like a washer or dryer—or high-value electronics (a computer or TV), both offer good peace of mind.
Depending on your card's terms, purchase protection may have coverage limits for certain types of claims or spending categories, so be sure to read your policy carefully, and save all receipts in case you need to make a claim. Here are some of the best options for purchase protection and extended warranty coverage.
If you absolutely must make a purchase that you can't pay for in full once your monthly statement comes due, a credit card with an introductory 0% APR may be a good option to avoid adding interest to your debt. If one of your existing cards with other rewards or benefits listed here doesn't offer a grace period (or if that grace period isn't long enough), you could open a new account that offers 0% APR on purchases for anywhere from 12 to 21 months. Here are some of the best 0% APR intro offers to consider. A handful even come with rewards, such as points or cash back.
Remember, you still have to pay off the balance before your 0% APR intro period ends—otherwise, you'll get hit with costly interest and fees. Don't neglect the balance until the last month or you may find yourself in the same situation you started in.
If you aren't planning to pay off your card balance by the due date, interest isn't the only thing to keep an eye on. Your credit utilization ratio will likely also jump up and stay elevated if you aren't paying down the debt, which will affect your credit score. This may not be a huge concern if you aren't applying for new credit in the near future and have a concrete plan to lower your balance, but you should keep an eye on your score.
