Should You Use Your Credit Card for Big-Ticket Purchases?

Credit cards are one of the most pervasive modes of transaction in the world. One of the most important considerations for using them is big-ticket purchases. It is a fact that credit cards eliminate the hassles of carrying large notes and make it easy for anyone to purchase expensive products or services. 

However, since overuse of credit can be to the detriment of your financial health, you should be aware of what purchases you should avoid making using credit cards. Scroll down to read more.

Advantages of Using Your Credit Card for Big Ticket Purchases

You can get numerous benefits by paying for big-ticket purchases with a credit card. Some of these are discussed below:

• Welcome and Milestone Benefits

Many credit cards offer you a one-time welcome bonus on making a purchase of a certain amount. You can avail this bonus by making your big-ticket purchase unless you have already used up this offer.

Furthermore, credit cards also offer certain milestone benefits. To avail them, you must cross a minimum spend threshold. If you already have a big-ticket purchase in your plan, then you can pay for it with a credit card. With this, you will be able to achieve the minimum spend threshold and get milestone benefits.

• EMI Facility

One of the most important advantages of paying for big-ticket purchases via a credit card is that you can pay for it in small monthly instalments by availing the EMI facility. Thus, if you feel that a certain big-ticket purchase can become a big burden on your finances, you can resort to monthly EMIs.

• Reward Points

Credit cards provide reward points on almost every purchase that you make through these credit cards. When you are making a big-ticket purchase, you will be earning thousands of reward points through which you can buy various products and services or convert them into cash. 

You would not get these benefits when you are paying the money through any other medium like internet banking, debit card or cash. Thus, it is an important factor which makes using a credit card for such purchases quite beneficial.

• Spend Based Offers

Credit card issuing banks often provide special spend-based offers from time to time. This is especially available during festive seasons like Durga Puja and Diwali. With such offers, you can save a lot of money when you use your credit card.

• Extended Warranties, Purchase Protection and Price Protection

Credit card service providers also provide several additional benefits that make it convenient to use credit cards for expensive purchases.

One such perk is the warranty extension facility. Through it, the credit card providers extend the warranty of the product after the manufacturer’s warranty period is over. An extended warranty increases the overall protection period of the product.

Another benefit provided is purchase protection under which the credit card issuing bank will cover the costs of repair or replacement in case the purchased item gets stolen or damaged within a particular time. Thus, if provided by your credit card, you can save a lot of money if you accidentally break the item.

Furthermore, the price protection policy of a credit card ensures that you do not overpay for the big ticket purchase that you are making. Thus, the credit card issuer can reimburse you if the purchased item’s price drops within a small time after you have bought it.

Which Big Ticket Purchases Should You Make with Your Credit Card?

Availing credit card payments for big-ticket purchases might be a good idea under certain conditions.

There are certain credit cards which provide good sign-up bonuses and rewards which might require you to spend a certain amount of money within the first few months. In such times, getting a high-priced item by credit card can be a profitable idea.

If you can qualify for a 0 percent APR credit card option then, you will be able to pay for your purchase for as long as the promotional period is in action. In such an instance, it can be quite beneficial for you to opt for paying for the big ticket item via a credit card.

Another reason why you can pay for a big ticket purchase with a credit card is that you can get an extended warranty or purchase protection from it. Thus, in such cases, you can opt for paying for big-ticket purchases with a credit card.

Some of the big ticket purchases in which it is suggested that you use a credit card are given below:

• Electronics and appliances
• Travel
• Online purchases
• Mobile bills
• Event tickets

When to Avoid Using a Credit Card for Big Ticket Purchases?

There are a number of situations where you should avoid using a credit card for big-ticket purchases. Here are some of the instances in which it would be better to avoid paying with a credit card:

• When Your Available Credit can Be Wiped Out

If you avail an EMI then the bank automatically blocks a certain credit amount the credit limit of your credit card will be reduced. When you are paying for a big-ticket purchase your credit limit will be substantially reduced. Furthermore, a high credit utilisation ratio might also affect your credit score.

• When You Are Doing It for Just the Signup Bonus

If you are paying for a large purchase just for the sake of earning a sign-up bonus, then you must rethink your decision. If you are making a big-ticket purchase from which you are financially not in a position to repay the credit amount, then it is a very risky decision that you must refrain from. 

You must also always consider the interest and the other charges that will be added to this amount.

• When You Only Want the Limited Time 0% APR

Do not be enticed into making unnecessary big-ticket purchases with a 0% APR card. You must remember that even with 0% interest being charged on the amount because if you are unable to pay off the amount within the promotional period, interest will be charged on the remaining amount. This will continue to grow until you repay the amount in full.

Things to Consider Before Deciding to Use a Credit Card

Here are some of the important things that you must consider before deciding whether to make big-ticket purchases via a credit card:

• Your Budget

It is extremely crucial to consider your financial capability and budget before making a big-ticket purchase with a credit card. Check your financial liabilities including upcoming payments that you might have to cater to and any loan repayments that are scheduled.

You must also have a plan on how you will repay the amount from the purchase. If you have enough finances which can take care of the repayment of the big payment then only think about moving on with the purchase plan.

• The Necessity of a Purchase

Mostly, big-ticket purchases are made on spontaneous temptations. Such decisions do not incorporate consideration of financial capabilities.

It is recommended to carefully consider if the large financial burden that you are taking onto yourself is required at all and if it adds any value to your life. This will make you think rationally based on your requirements and financial capabilities. 

Final Words

It is often said that you should always make any big-ticket purchase through a credit card. However, despite the undeniable benefits of paying for such purchases via a credit card, it also has its share of disadvantages.

Before making a substantial credit card transaction, consider whether your budget will allow it and whether it is necessary. This will help you make better financial decisions.

Frequently Asked Questions