If you’re considering making a large purchase with a credit card, be prepared to step away and assess. Remember that impulse buys are rarely a good idea in the long run. However, if after deliberation, you still choose to make the purchase—and you’re not likely to pay it off within 6-9 months—be sure it’s made on a low interest credit card.
Credit these days is not as convenient or readily available compared to just a year ago. The events of the last few months is a reminder that financing is never “free” and that the money borrowed will need to be paid back eventually. Are you in a position to do so? Also, how much are you willing to spend tomorrow for a purchase made today (soon to be yesterday)? These and other questions await your answer.
As the pros and cons of a large credit purchase are weighed, one factor goes without saying: the interest rate. If you make a large purchase on credit, you absolutely must limit your options to low interest credit cards. Even if a higher interest card offers attractive perks, the main reason for “this” card is to make the large purchase. Thus, the most important part to consider is the interest rate and the charges that will be applied each month.
- Don’t buy on impulse: Do I need this now? Can I afford this now (and by way of credit, in the future)?
- Create a plan for repayment and stick to it.
- If the offer is 0% APR, take advantage of it. Don’t let months pass by simply because no interest will accrue; eventually it will kick in.
- Remember that late payments lead to a penalty finance charge, as well as a negative on your credit score.
With a large purchase, the idea is that you’ll pay it off in increments. One question to ask yourself is: Can you afford this item? Credit may make it easy to say “yes” but you need to think long-term. Can you really afford this item in the end? Will you only be able to make minimum payments? Because if the answer is “yes” to this, then your large purchase could end up costing you twice as much as it would, had you paid with cash.
Hardly a bargain, but that’s what many of us commit to with impulse buys. Fortunately, with low interest credit cards, minimum payments do in fact shrink, while the impact of what we can pay grows.
Indeed, one of the benefits of low interest credit cards is that they can help cardholders manage their balances better. Ideal for balance transfers, as well as large purchases, they can help slow the growth of a balance. Though there are still finance charges to factor in, you’re at least able to chip away at the debt owed.
In the meantime, is that large purchase still what you want? The frustrating part about financing is that oftentimes the luster of a new purchase dulls with time, but still you’re paying for it. Every month, like clockwork. What purchase then is too large for a credit card?
“How often can the bank change the rate on my credit card account?”
See the answer at Help With My Bank.gov
As said, low interest credit cards make large purchases even more attractive because they seem so easy to pay off. Yet, keep in mind that even zero-interest cards still affect your purchasing power. You may be able to pay off the balance before finance charges kick in, but in that time, you’re still be taking away from the present to catch up with the past.
Also, if you choose to put off payment(s) because of 0% interest, eventually debt will catch up to you. Again, nothing is truly “free.” Just another consideration to keep in mind as you ponder a large purchase. The satisfaction may be immediate, but the price to be paid is merely delayed.
